Definition
Price-Time Priority
Price-time priority is the rule by which an exchange's matching engine ranks orders: better-priced orders execute first, and among orders at the same price, the one entered earliest takes precedence.
Indian exchanges operate on strict price-time priority, so a resting limit order placed earlier at a given price will fill before a later one at the same price. This makes queue position valuable and is a key reason latency-sensitive participants race to post quotes first.
Understanding price-time priority explains order-placement tactics: traders improve price to jump the queue or get in early to secure priority. It also underlies market-making economics, where being at the front of the queue increases fill probability and the chance to earn the spread.
Related terms
- Market Making (Algorithmic)Algorithmic market making is the automated, continuous posting of buy and sell quotes for a security to provide liquidity, earning the bid-ask spread while managing inventory and adverse-selection risk.
- Limit OrderA limit order specifies the maximum price a buyer will pay or the minimum a seller will accept, executing only at that price or better and resting in the order book until it can be filled.
- Order Book ImbalanceOrder book imbalance is the difference between resting buy and sell volume at or near the top of the book, used as a short-term signal of likely price direction.
- Matching EngineThe matching engine is the core exchange system that receives orders and matches buys against sells according to price-time priority, generating trades and updating the order book in real time.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.