Notices

Pro-rata

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Definition:
Pro-rata is a matching algorithm used by some exchanges as a way of allocating market orders (paper) between different customers with resting orders waiting for a fill at the same price, as opposed to trading purely on a first in first out basis (see fifo).


Pro-rata trading takes three factors into account when deciding client order priority:

  • Price - best bid/offer price in the market
  • Time - the time the order was entered into the market
  • Volume - the volume (number of lots) of a particular order

Volume size of resting orders in particular is key to the allocation process. ie: if the bid is for 1000 contracts, and your order is for 500 lots even though you joined the queue last, were a market order to sell 50 placed, you would likely receive 25 lots which is 50% of that transaction - since your order comprised 50% of the total bid.

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