Most U.S. equities markets determine allocation on a price/time priority basis. The first order at a price will get fully filled before orders that were received later at that same price. Price/Time generally encourages participants to be first at a price, due to the reward of being filled first. However, longer-term investors who focus on price rather than time may miss trading opportunities in this price/time model.
Nasdaq PSX (PSX) is different. PSX offers parity among resting orders through its pro rata allocation methodology, allowing participants that are slower to a price level to have confidence that their resting orders will trade more often, regardless of their place in time priority, and thus experience fewer missed opportunities.
Watch this short video to see PSX with our Price Setter Pro Rata Model in action.
Note: Any resting orders, including passive offers, are eligible for allocations on PSX.
The order that sets the PSX Best Bid or Offer (PSX BBO) is guaranteed 40% allocation of the incoming order. The remaining 60% of the incoming order is executed against the remaining resting orders via a Pro Rata allocation.
In addition to expanding market choice for buyers, PSX’s model encourages participants to display size and set the best price, so it can be used as a reliable strategy to access liquidity.
PSX opens strategic opportunity by bringing parity to the market:
PSX is for traders looking for a strategic approach to resting orders on exchanges — PSX rewards for larger order size, provides parity regardless of your place in line and, overall, provides unique trading opportunities.