Order Execution Priority

Order execution priority refers to the set of rules that determine which orders are filled first when multiple orders exist at the same price level. The most common rule is price-time priority, where orders at the best price are filled first, and among those, the ones placed earliest are prioritized.

Some exchanges use pro-rata allocation, where fills are distributed proportionally among all orders at the best price. Understanding these rules is essential for market makers, as it dictates their strategy for placing orders to ensure they capture the spread.

Failure to account for execution priority can result in missed opportunities or unwanted inventory accumulation.