Post-Rejection Markout is a performance metric in high-frequency trading, particularly relevant in RFQ crypto and institutional options, which quantifies the price movement of an asset after an order submission has been rejected. This metric measures the opportunity cost or adverse selection incurred due to the rejection, indicating whether the market moved favorably or unfavorably for the trader shortly after the unsuccessful attempt to transact. It helps evaluate the efficiency of order routing and execution systems.
Mechanism
The system records the exact time and price of an order rejection. It then monitors subsequent market prices for the same asset over a predefined short time window (e.g., milliseconds to seconds). The difference between the rejection price and the observed market price at various points within this window constitutes the markout. Data capture modules log rejection events, and analytical components compute price changes post-event.
Methodology
Analyzing post-rejection markout is crucial for optimizing algorithmic trading strategies and improving system robustness. A high positive markout suggests missed opportunities or adverse selection, indicating that the order might have been rejected because the price was already moving against the desired direction. Conversely, a negative markout implies that the rejection averted a potentially unfavorable trade. This metric helps systems architects fine-tune parameters like quoting aggressiveness, latency, and exchange connectivity, aiming to reduce financially detrimental rejections and enhance overall execution quality.
We use cookies to personalize content and marketing, and to analyze our traffic. This helps us maintain the quality of our free resources. manage your preferences below.
Detailed Cookie Preferences
This helps support our free resources through personalized marketing efforts and promotions.
Analytics cookies help us understand how visitors interact with our website, improving user experience and website performance.
Personalization cookies enable us to customize the content and features of our site based on your interactions, offering a more tailored experience.
