Price/Time Priority

The principle of price/time priority refers to both orders and quotes. When an order (or quote) is entered into the order book, it is assigned a timestamp. This timestamp is used to prioritize orders in the book with the same price - the order entered earliest at a given price limit gets executed first. When a new order (or quote) is entered, the Eurex® system first checks the limits of all orders contained in the central order book. If the incoming order is immediately executable, meaning it is capable of being matched against an existing order or orders, one or more transactions are generated. To be immediately executable, the order must be:

• A market order, where opposite already exist in the central order book;
• an order to buy at a price at or above the lowest offer in the central order book;
• an order to sell at a price at or below the highest bid in the book.

Orders may not necessarily be executed at a single price, but may generate several partial transactions at different prices. When a large order executes against the total available quantity at a given price level, the next best price level becomes best. This process continues as long as the incoming order remains executable. If not executed upon entry, an order is held in the central order book.

Also, it is possible for a single order to generate multiple executions at different points in time. For example, an order may generate a partial execution upon entry, while the remaining open order remains in the order book. The open portion may get executed a minute later, an hour later, or even a day later, if its validity extends beyond the current trading day.

All executions are subject to the restrictions of the Market Order Matching Range.

Market orders have the highest priority for matching. Since the purpose of the market order is to be executed as quickly as possible at the best possible price, it must be entered without execution restrictions. If several market orders are booked in the order book, the Eurex® system takes into account the timestamp of the orders to establish matching priority. The earliest market order entered receives the highest priority.

In the case of limit orders, orders with the best possible prices (highest price limit for buy orders, lowest price limit for sell orders) always take precedence in the matching process over other orders with worse prices. Again, if the limit orders have the same price limit, the criterion used for establishing matching priority is the order timestamp.

The orders already present in the order book are always executed at their specified limit price. Price improvements for orders in the order book are only possible during an auction process - opening or closing auction. Orders going into the order book are always matched at the appropriate prices available in the order book, up to the specified limit price.