Limit order books

Depth Characteristics for the Electronic Futures Limit Order Book

“…The six futures contracts we examine are the most liquid contracts in their specific category, therefore liquidity should not be a differentiating factor. However, Gould et al (2013) state that different order matching mechanisms of the exchanges can cause traders to behave in differing ways. The FIFO (First In, First Out) order matching algorithm encourages market participants to place limit orders early in order to obtain time priority.…”

“…Gould et al (2013) specify that the tick size is an asset specific feature that can affect order placement within a limit order book. In particular, the tick size determines how expensive it is for a trader to gain priority in the limit order book by choosing a higher (lower) price for a buy (sell) limit order.…”

Game Theoretical Aspects of Colocation in High-Speed Financial Markets

“…In order to grasp the implications of the empirical proof on the existence of technical arbitrage opportunities in low-latency environments as it is provided by Budish et al (2013), I will first review the basic mechanics of their model. The practical relevance of the environment described by Budish et al (2013) becomes apparent when considering that "limit order books match buyers and sellers in more than half of the world's financial markets" (Gould et al 2013(Gould et al , p. 1709. In their analysis, Budish et al (2013) show that HFT traders can exploit arbitrage opportunities due to correlation breakdowns between ES and SPY.…”

Price efficiency and trading behavior in limit order markets with competing insiders

“…Kyle (1985), Holden and Subrahmanyam (1992), and Grossman and Stiglitz (1980) provide some insights but must be interpreted cautiously as these models implement pricing mechanisms other than LOMs. The same constraints apply to experimental studies as no study specifically focuses on competition issues 1 See Parlour and Seppi (2008) and Gould et al (2013) for surveys on limit order markets. Examples for limit order markets are: Euronext (Brussels, Amsterdam, Paris), Stockholm Stock Exchange, Toronto Stock Exchange, and Archipelago Exchange.…”