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The order matching algorithms popularly used by electronic financial exchanges include FIFO or pro-rata or other variants. The use case where the order amount matches or is within the margin of the tick is a happy-path scenario. I want to know how do these algorithms operate when the order amount don't match?

Scenario 1 - If a partial fill happens and out of 100 order, 50 orders gets filled. The residual order book will hold the remaining 50. So what happens with these 50? How long do they have to wait?

Scenario 2 - If the buy order is for $50, and no sell order comes in which is below $60. So what would happen to these kind of orphaned orders?

nivasan89
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  • http://stackoverflow.com/questions/13112062/which-are-the-order-matching-algorithms-most-commonly-used-by-electronic-financi – CMPS Apr 01 '15 at 14:28
  • Thanks for the link. I saw that too. It was talking about the happy-path scenario of how the order amount matches and trade happens. I want to to know the negative cases wherein the highest buy order is still less than the lowest sell order. These kind of orders will not be matched and i want to know what happens with them? Do they wait around for a specific amount of time? Or is it the duty of the buyer or seller to watch the market and revise his quoted amount? – nivasan89 Apr 01 '15 at 14:32
  • @nivasan89 Late late reply, but it may help others. Answer is that it depends on the type of the order. If the order is BUY@Limit, then it will hang in the order book until it matches a sell order. If the order is BUY@Market, it will get the best price to match that order. That price may be higher than what you are willing to pay. – Standaa - Remember Monica Jun 06 '19 at 11:26

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