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Indecisive algos: Do limit order revisions increase market load?

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  • Jurich, Stephen N.
  • Mishra, Ajay Kumar
  • Parikh, Bhavik

Abstract

This study examines the behavior of algorithmic and non-algorithmic (human) traders on the National Stock Exchange (NSE) of India around the flash-crash that occurred on October 5, 2012. We analyze the prevalence of orders, cancellations, and modifications by algorithmic and human traders. Over half of the orders in the sample are canceled, while the submitted orders are modified over 15 times. Algorithmic traders dominate over human traders and are more likely to cancel and/or modify their orders in normal market conditions. However, human traders canceled more orders prior to the flash-crash event, whereas algorithmic traders modified their orders. Following the crash event, humans were quick to resume trading, while algorithmic trading increased gradually. Our findings demonstrate behavioral differences between algorithmic and human traders around uncertain periods.

Suggested Citation

  • Jurich, Stephen N. & Mishra, Ajay Kumar & Parikh, Bhavik, 2020. "Indecisive algos: Do limit order revisions increase market load?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).
    • Handle: RePEc:eee:beexfi:v:28:y:2020:i:c:s221463502030335x
    DOI: 10.1016/j.jbef.2020.100408
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    More about this item

    Keywords

    Order; Revision; Cancellation; Algorithmic traders; Market quality;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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