Pro Rata Matching

Pro rata matching is used for Money Market Futures. When the intraday volatility of the inside market price of a product is low, under price/time priority a large order may prevent smaller orders from participating in the matching process. Pro rata matching ensures constant access to the inside market for orders of all sizes.

When matching existing orders in the book against an incoming order, the pro rata matching algorithm takes into account every book order at the inside market price according to its percentage of the overall volume bid or offered at the price, regardless of its timestamp. Thus the pro rata principle avoids a conflict in priority between orders with small and large quantities.

The elimination of prioritization by time results in a larger number of book orders contributing to a trade, since an incoming order is partially matched against a proportion of all orders in the book at the current inside market price.

Market orders for pro rata matched products must be entered with the restriction code IOC. Therefore, no market orders are stored in the order books for products associated with pro rata matching. When a market order, or part of it, can only be matched outside the Market Order Matching Range, the remaining quantity is cancelled. When market orders are entered and no reference price is available, the market order is cancelled.