An Empirical analysis of price and time priority and pro rata trade execution algorithms in screen-traded markets

Alex Frino, Amelia Hill, Elvis Jarnecic

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

The Chicago Mercantile Exchange altered the algorithm governing trade execution in the Eurodollar futures contract on its electronic trading system on September 20, 1998, when it moved from price and time priority to pro rata allocation. This provides a unique natural experiment to assess the impact of the two different algorithms on market quality. This study carries out three tests, and finds that the change did not have a statistically significant impact on various proxies for liquidity, both before and after controlling for changes in general market conditions. This implies that the choice of algorithm has little impact on the quality of screen-traded markets.
Original languageEnglish
Pages (from-to)41-48
Number of pages8
JournalJournal of Derivatives
Volume7
Issue number4
DOIs
Publication statusPublished - 2000
Externally publishedYes

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