Purge port

The exact implementation of purge ports may differ from one matching engine to another. Purge ports can be thought of as ports on dedicated order entry gateways of a matching engine, which only handle cancellation messages, thus offering less contention or a faster path.

For example, a dislocation in fair price may lead to a flurry of IOCs from liquidity takers looking to sweep remaining mispriced orders left over by market makers. In such cases, regular order entry gateways might be congested with orders from liquidity takers. Orders sent through a port on such a gateway may see a larger delay between gateway receive and match than usual, because of the load and queue depth on the gateway. A purge port would allow a market maker's order to bypass these congested gateways and potentially hit the matching engine's FIFO queue before a competing liquidity taker's order, even if the liquidity taker had a faster trading system and had written their order to the wire first.

Purge ports are often used in tandem with mass cancels to allow a market maker to manage their orders more quickly against adverse selection.

Example implementations of purge ports include:

• Equity Purge Ports, found on Cboe.
• Specialized Quote InterFace (SQF) Purge-only Ports, found on the Nasdaq Options Market.

The supported functionality of a purge port varies with venue implementation. Cboe's Equity Purge Ports allow member firms to cancel a subset of open orders by MPID, symbol, or RiskGroupID. Members can create such RiskGroupIDs and tag orders with specific RiskGroupIDs.

On trading venues that offer dedicated gateways as an premium add-on service, a participant may emulate the benefits of a purge port by setting aside a dedicated gateway for more latency-sensitive actions like cancels or aggressive IOCs.