GAMING IN FUTURES MARKET SUGGESTS MODEL COULD BE IMPROVED

CMCRC has found that changes to the matching algorithm used in futures markets leads to new strategic behaviour by traders.
The research examines the 2007 change in LIFFE STIR futures contracts. LIFFE moved to time pro-rata allocation, which considers the size of an order and its relative position in the order book in determining what proportion of an incoming market order will be allocated to each order. Evidence suggests prior to this, traders were drowning the market with oversized orders, increasing their allocation under a pure pro-rata matching algorithm.
Source:
Mondovisione