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Order Placement Strategies In A Pure Limit Order Book Market

  • Charles Cao
  • Oliver Hansch
  • Xiaoxin Wang

Using order book information from the Australian Stock Exchange (ASX), we examine whether (and to what extent) the order book affects investors' order placement strategies. We find that the top of the book always affects order submissions, cancellations, and amendments, and the rest of the book mostly affects order cancellations and amendments. The previously documented order submission aggressiveness, given a crowded first step of the book, persists to other price steps and is found in order amendments and cancellations along the book. Finally, investors tend to fill in the large price gaps in the book by submitting or amending orders. (c) 2008 The Southern Finance Association and the Southwestern Finance Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1475-6803.2008.00234.x
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Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

Volume (Year): 31 (2008)
Issue (Month): 2 ()
Pages: 113-140

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Handle: RePEc:bla:jfnres:v:31:y:2008:i:2:p:113-140
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  1. Sandas, Patrik, 2001. "Adverse Selection and Competitive Market Making: Empirical Evidence from a Limit Order Market," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 705-34.
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