Couldn't we just cancel existing order and enter new order?

Is there any other reason apart from a communication overhead that now we need to send 2 messages vs just 1 message to cancel replace?

  1. Order Cancel-Replace might save you from losing priority in the book (for instance when cancelling some of the remaining shares - check the venue rules!).

  2. The communication overhead is very significant - it halves the round trip time (otherwise you have to cancel; wait for confirmation; re-send -- if you don't wait you risk getting double fills).

  3. At any given time you have your order active in the book (unless rejected).

  4. Margin/risk checks might also be faster (vendor-specific of course)

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  • $\begingroup$ Hi amsh, welcome to Quant.SE! $\endgroup$ – Bob Jansen Sep 10 '15 at 7:30
  • $\begingroup$ do you know a venue, that would keep your priority in the book when doing cancel-replace? $\endgroup$ – LazyCat Sep 10 '15 at 13:43
  • $\begingroup$ It depends on what parameters you change, as mentioned above - reducing the quantity will (usually) save your priority. As far as I know, most venues behave this way. For further reading (CME): cmegroup.com/confluence/display/EPICSANDBOX/… $\endgroup$ – amsh Sep 10 '15 at 15:29
  • $\begingroup$ yeah, I was curious if there are venues, that allow to increase the quantity without loosing the priority. $\endgroup$ – LazyCat Sep 10 '15 at 15:39
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    $\begingroup$ I doubt it - very prone for abuse $\endgroup$ – amsh Sep 10 '15 at 15:39

It is aimed at maintaining order book priority based on most venues price/length/time order book priority logic. The order cancel/replace request is used to change the parameters of an existing order and the intention is not to cancel an order outright or cancel remaining quantity after a trade. Venue FIX API's are coded to see 2 distinct differences between cancel and cancel/replace. However, certain amendments to the order will cause it to lose it's place in the order book.

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