Full-Fill Exchange Simulation Rules for Limit Orders

Summary

This exchange model for a level-three order book simulates limit and market orders without partial fills. Resting limit orders enter a queue model when they do not cross the opposing best quote. A marketable order, or a limit order priced through the best opposing quote, is filled in full at that best price; eligible resting orders can also fill when queue position and subsequent trade or price movement satisfy the model’s conditions. The implementation accounts for order acknowledgments, cancellations, modifications, exchange events, latency, fees, and order status.

The simplification creates a material execution caveat: liquidity-taking orders fill completely at the best price regardless of displayed quantity. Large orders can therefore receive unrealistic simulated fills. The document describes mechanics, not empirical validation, and its no-partial-fill assumption can distort fill rates, execution costs, and strategy results when liquidity is limited.

Key ideas

• The model supports limit orders and selected time-in-force instructions within a level-three order book.
• Non-marketable orders are added to a queue, where their position affects later fills.
• Marketable orders are fully filled at the best opposing price regardless of available quantity.
• Queue position and market-feed events determine whether resting orders qualify for a fill.
• The full-fill assumption can overstate execution quality for large liquidity-taking orders.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.