Order-to-Trade Ratio

The order-to-trade ratio compares the number of order messages a participant sends — new orders, amendments, cancellations — with the number that result in an actual trade. It is a supervisory measure: European market rules require trading venues to monitor it and to have arrangements that discourage message traffic which burdens systems without contributing to trading. Retail traders come nowhere near the thresholds involved, which are aimed at automated strategies sending very high volumes of messages. The concept still explains things they meet. It is one reason venues and brokers publish messaging limits in their terms, why some accounts cap the number of pending orders or how often an order may be modified, and why an algorithm that constantly repositions unfilled orders can attract attention or charges even when the volume it actually trades is small.