Abstract
Selecting the optimal venue for limit order placement depends on the specific exchanges competing at the NBBO at the time of order placement. The speed of a fill at NASDAQ depends not only on NASDAQ’s market share, but whether orders at the same price are also posted at IEX or EDGX, for example, or some other combination of the 15 other exchanges—and 65,535 possible combinations of exchanges that could be competing simultaneously at the NBBO. This article outlines specific examples of “queue-jumping” and describes quantitative methods that can be used to identify the exchanges with the highest likelihood of filling limit orders in real time. A ranking system called Elo used to rank chess players and online video gamers is applied; rankings are assigned to exchanges and used to determine which exchange is most likely to receive the next marketable order for any of the possible combinations in competition. Exchanges are ranked under varying conditions, and the rankings are used to address the problem of queue-jumping.
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