Discriminatory Pricing Rule

December 5, 2008

In his discussion of continuous order matching systems Harris describes the discriminatory pricing rule on p126: “the limit price of the standing order determines the price of each trade. If the market matches a large incoming order with several standing limit orders placed at different prices trades will take place at the various limit order prices.”

Which means no price improvement for standing orders at best bid if an incoming marketable sell limit order matches one or two levels off best bid.

Xmas reading

December 1, 2008

Christmas is coming, and I’ve been figuring out my reading list for the break. I’ve pulled my old copy of Godel, Escher, Bach off the shelf, and have started the first re-read for 20 years. A couple of things hit me right off the bat: how could I have missed the GEB/EGB (Godel,Escher,Bach/Eternal Golden Braid) sequencing pun ?  And it seems obvious that GEB is a big influence on briarpig‘s style. I’m also looking forward to reading Hasbrouck‘s Empirical Market Microstructure. Looks like a natural successor to Harris’ Trading and Exchanges.
Thought for the day: to be is to be the value of a bound variable.