Limit-order submission strategies under asymmetric information

Abstract

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Intraday Liquidity Provision by Trader Types in a Limit Order Market: Evidence from Taiwan Index Futures

“…As expected, the elasticity of these market variables and limit order size for all (aggregate) traders are in the range of corresponding elasticity of these four types of traders. Our results support the finding by Menkhoff et al (2010), which demonstrates that the order aggressiveness of informed traders is more response to market conditions than uninformed traders in ordered logit models.…”

“…In addition, Menkhoff et al (2010) also find that informed traders are more sensitive to change in the spreads, volatility and depths than uninformed traders in a pure limit market. There are two major concerns in their quality of data used in empirical tests: (1) the data lack trader identification code on trader type, causing the authors to assign a trader as either informed or uninformed based on the inference from the trade size and location information; and (2) the data cover only a seven intraday data period, which may be too short for reliable empirical tests.…”

“…Bloomfield et al (2005) also find that volatility is one the major factors affecting both informed and uninformed trader's choice between limit and market orders. Menkhoff et al (2010) investigate the use of aggressive-price limit orders by informed traders versus uninformed traders in an ordered logit regression framework with data from the Moscow Interbank Currency Exchange. They show that volatility variable is negative and highly significant for informed traders and significant at 10% level for uninformed traders.…”

“…They find that the order size, spread, and expected transitory volatility are positively related with the trader order choice. Using data from the Moscow Interbank Currency Exchange, Menkhoff, Osler and Schmeling (2010) investigate the use of aggressive-price limit orders by informed and uninformed traders in an ordered logit regression framework. They show that informed traders are more sensitive to changes in the spread, volatility, and market depth than uninformed traders in a pure limit market.…”

Pre-trade transparency and informed trading: Experimental evidence on undisclosed orders

“…In terms of submitted shares, I do not observe signi…cant di¤erences between large liquidity and informed traders. In other words, informed traders are as active as large liquidity traders in liquidity provision (Menkho¤, Osler and Schmeling, 2010). This evidence suggests …erce competition, that is, a race to trade (Boulatov and George, 2013) between two trader types for liquidity provision.…”