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Duplicated Orders, Swift Cancellations, and Fast Market Making in Fragmented Markets

Author

Listed:
  • Hans Degryse

    (CEPR - Center for Economic Policy Research - CEPR)

  • R. de Winne
  • Carole Gresse

    (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Richard Payne

Abstract

Employing unique data from 91 stocks trading on their primary exchanges and three alternative venues, we show that limit orders are duplicated across competing venues as a result of cross-venue market-making strategies, leading to swift cancellation of duplicate orders after one of them is filled. This Duplicated-then-Canceled Liquidity is predominantly used by high-frequency traders when their inventories are not excessive. It reduces the execution costs of fast traders on alternative venues. It however has some adverse impact on execution costs on primary exchanges but those negative effects fail to outweigh the liquidity benefits of market fragmentation.

Suggested Citation

  • Hans Degryse & R. de Winne & Carole Gresse & Richard Payne, 2019. "Duplicated Orders, Swift Cancellations, and Fast Market Making in Fragmented Markets," Post-Print hal-04455567, HAL.
    • Handle: RePEc:hal:journl:hal-04455567
    as

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