Fair Allocation Model

Optio strives to foster a deep, diverse market place; we invented a fill allocation schema to help keep the game fair. The Fair Allocation Model is designed to prevent a deep pocketed institution from locking out smaller liquidity providers and market makers.

The crux of the model is that participants at the same price level participate equally in fill volume, up to their size. The top order (in the price/time sense) receives a slight preferential allocation of 30% in order to foster competition.

Consider these "Volatility Levels" in an Optio order book

Bid Size	Bid Volatility	Ask Volatility	Ask Size
		69.1%	2.5
		69.0%	36.2
250.2	68.4%
310	65.0%

Now consider the group of actual buy orders that comprise the top bid level; the order marked as such was the first order to arrive at (or remain at) this 68.4% volatility level. Below we will examine giving this top order a preference of 30% while filling a market order among the other bidders.

Whitelist Account	Size	Volatility
MM A1 (top order)	15	68.4%
MM A2	10.2	68.4%
MM A3	125	68.4%
MM A2	100	68.4%
MM A4	310	65.0%

If a market sell order for 30 contracts comes in, the fill logic is as follows:

1. With a top-preference of 30%, the top order receives an allocation of 9, it has 6 remaining.

2. There are now 21 lots of incoming demand to fill.

3. There are 3 total ACCOUNTS with orders (including the top- A1, A2, A3) at the 68.4% level

4. Each account will split the 21 lots of demand, equally, up to their posted size:

   1. A2 receives 7 lots

   2. A3 receives 7 lots

   3. A1 is fully filled with 6 more lots

   4. The last remaining 1 lot is split equally by A2, and A3, 0.5 lots apiece.

In the case where an incoming order engulfs the entire top level of the book, the balance follows the same logic down the subsequent levels.