Micro-batch clearing: Uniform pricing as a pricing-rule reform for latency rents

In this paper, we propose Micro-Batch Clearing, a matching mechanism that eliminates latency rents through a change to an exchange’s pricing rule rather than a redesign of its architecture. The change is to matching-engine logic only — uniform within-batch clearing, pro-rata allocation, and sealed-interval handling — with no change to network topology, order routing, co-location, or the persistent order book. Within each short sealed batch interval, all crossing orders execute at one uniform clearing price, removing the within-event mapping from speed to execution price that a continuous limit order book (CLOB) creates. Unmatched orders persist in the resting book and roll into the next batch, so the mechanism retains CLOB’s order-book persistence while altering only the price at which the matching engine clears, leaving order submission, routing, and co-location unchanged. This distinguishes it from Frequent Batch Auctions (FBA), which deliver the same speed-rent elimination but require the exchange to operate as a discrete-time auction and discard unmatched orders. Using a dual-engine simulation across 10 distinct mechanisms under identical synthetic order flow, with 10 independent seeds each, we compare Micro-Batch with CLOB, two FBA variants, and eight queue-allocation specifications, of which six are distinct in this latency regime (throttled-time at 10[Formula: see text]ms and 100[Formula: see text]ms coincide with per-order random. We measure the speed advantage directly, as the share of executed volume accruing to low-latency (HFT) participants relative to their 20% population share. Under CLOB, HFT participants capture 65% of executed volume; under Micro-Batch this falls to 12%, below their population share, and under FBA to 13%. Queue-allocation rules achieve only partial neutralization (31–45%). Micro-Batch matches FBA’s elimination of the speed advantage at comparable slippage (1.55 versus 1.92 ticks) and a similar liquidity cost: fill volume falls to 47% of CLOB under Micro-Batch and 52% under FBA, the principal cost of either reform. A two-channel framework attributes the speed advantage to within-level queue priority and to the latency-determined order in which marketable orders consume a multi-level book within one event; uniform pricing removes both. We show that, under any admissible uniform-pricing rule with pro-rata allocation, zero speed investment is a strictly dominant strategy. NASDAQ Level 3 data across 27 stock-days is consistent with the FIFO time priority the framework assumes (mean [Formula: see text] under CLOB versus 0.05 under a randomized-priority placebo).