First-come first-served is fine when there's consensus about the price. A lot of, if not most of, trading comes from people disagreeing about what a fair price is though - the buyer thinks it's worth more, the seller thinks it's worth less.
Consider 3 orders: Bob bids $9, Sam offers $8, and Sara offers $5. If they're entered about the same time, you may end up with a matched price of $5, $8, or $9 with either Sam or Sara getting to sell - all depending on which order the match engine processes them in.
Same orders, same time, huge variation in what is determined to be a fair price with no good reason. All those prices are wrong too. You can debate about what'd be right, but eBay's pricing system is at least an improvement here (one minimum price increment past the next-best order).
It gets worse - consider if one of them entered their order well ahead of time, it probably gave them the worst price - penalizing them for exactly what people want - a quote to see and trade against.
There's tons more examples, but they can get pretty complicated.. email me if you want to talk about it more.
If you're still having trouble imagining a fairer way, work out what would've happened with these three traders on the old NYSE floor system.
Consider 3 orders: Bob bids $9, Sam offers $8, and Sara offers $5. If they're entered about the same time, you may end up with a matched price of $5, $8, or $9 with either Sam or Sara getting to sell - all depending on which order the match engine processes them in.
Same orders, same time, huge variation in what is determined to be a fair price with no good reason. All those prices are wrong too. You can debate about what'd be right, but eBay's pricing system is at least an improvement here (one minimum price increment past the next-best order).
It gets worse - consider if one of them entered their order well ahead of time, it probably gave them the worst price - penalizing them for exactly what people want - a quote to see and trade against.
There's tons more examples, but they can get pretty complicated.. email me if you want to talk about it more.
If you're still having trouble imagining a fairer way, work out what would've happened with these three traders on the old NYSE floor system.