5 ms·

Also been involved in this line of work. How would you see the specifics of a batch auction working? I'd see it as not doing anything if the matches happened in

Also been involved in this line of work. How would you see the specifics of a batch auction working? I'd see it as not doing anything if the matches happened in a FIFO manner (it'd still pay to be first). Would a pro-rata batch auction fix the problem? Or would we have to introduce a random component to match all crossing orders in each batch?

joosters 12y ago
Batch auctions also have the opposite problem, whereby it makes sense to submit your bids as late as possible, to let you utilise the very latest information prior to the auction close. This might actually balance out some of the FIFO advantages?
- harmegido 12y ago
  In a lot of FIFO markets, you will see price levels that have a large number of orders on them. Being in the front of this line is very valuable to a market maker. Many will have those orders there weeks in advance specifically for the purpose of maintaining a good place in line. I wouldn't see this changing in a batch FIFO auction. But I've never seen such a match before, so who knows.
  - joosters 12y ago
    Ah, I was thinking that the concept of these batch auctions was to start with a completely clean order book every round. But as you say, that wouldn't be any good for people wanting long-lasting orders.
- ord-lhr-nyc-nrt 12y ago
  From what I understand batch auctions would match every participant's first order with everyone else's first order. Then all second orders would be matched together, all third, and so on. I think this is how one of the FX exchanges is doing it now (or will be soon). Caveat: I'm not a trader but was more on the engineering side.
  - kasey_junk 12y ago
    But what do you do when there are more participants on one side of the same price than the other? If it is FIFO you haven't eliminated any of the incentives for speed.

5 ms·

Also been involved in this line of work. How would you see the specifics of a batch auction working? I'd see it as not doing anything if the matches happened in

by harmegido 12y ago

joosters 12y ago
Batch auctions also have the opposite problem, whereby it makes sense to submit your bids as late as possible, to let you utilise the very latest information prior to the auction close. This might actually balance out some of the FIFO advantages?
- harmegido 12y ago
  In a lot of FIFO markets, you will see price levels that have a large number of orders on them. Being in the front of this line is very valuable to a market maker. Many will have those orders there weeks in advance specifically for the purpose of maintaining a good place in line. I wouldn't see this changing in a batch FIFO auction. But I've never seen such a match before, so who knows.
  - joosters 12y ago
    Ah, I was thinking that the concept of these batch auctions was to start with a completely clean order book every round. But as you say, that wouldn't be any good for people wanting long-lasting orders.
- ord-lhr-nyc-nrt 12y ago
  From what I understand batch auctions would match every participant's first order with everyone else's first order. Then all second orders would be matched together, all third, and so on. I think this is how one of the FX exchanges is doing it now (or will be soon). Caveat: I'm not a trader but was more on the engineering side.
  - kasey_junk 12y ago
    But what do you do when there are more participants on one side of the same price than the other? If it is FIFO you haven't eliminated any of the incentives for speed.