Arbeitspapier
Order aggressiveness and quantity: How are they determinted in a limit order market?
Dealers trading in a limit order market must choose both the order aggressiveness and the quantity for their orders. We empirically investigate how dealers jointly make these decisions in the foreign exchange market using a unique simultaneous equations model. The model uses an ordered probit model to account for the discrete nature of order aggressiveness and a censored regression model to capture the clustering of orders placed at the smallest available quantity, $1 million. We find evidence of a clear trade-off between order aggressiveness and quantity: more aggressive orders tend to be smaller in size. The increased competition (demand) suggested by increased depth on the same (opposite) side of the market leads to less (more) aggressive orders in smaller (larger) size. This holds for the depths at both the best and off-best prices, even though off-best depths are not observable to dealers.
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Canada Working Paper ; No. 2007-23
- Classification
-
Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
- Subject
-
Wertpapierhandel
Devisenmarkt
Makler
Börsenumsatz
Probit-Modell
- Event
-
Geistige Schöpfung
- (who)
-
Lo, Ingrid
Sapp, Stephen G.
- Event
-
Veröffentlichung
- (who)
-
Bank of Canada
- (where)
-
Ottawa
- (when)
-
2007
- DOI
-
doi:10.34989/swp-2007-23
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lo, Ingrid
- Sapp, Stephen G.
- Bank of Canada
Time of origin
- 2007
Other Objects (12)
Broker routing decisions in limit order markets
Markups in Canada: Have they changed and why?
Balance sheets of financial intermediaries: Do they forecast economic activity?
Belief dispersion and order submission strategies in the foreign exchange market
Sovereign default risk premia, fiscal limits and fiscal policy
Order flow segmentation, liquidity and price discovery: The role of latency delays
Measuring limits of Arbitrage in fixed-income markets
Limits to arbitrage and deviations from covered interest rate parity
Using speed and credit limits to address the procyclicality of initial margin at central counterparties
Limit theorems for limit order books
Die incremental order quantity : ein kritische Analyse
Optimal Continuous Order Quantity (s,s) Policies
Broker routing decisions in limit order markets
Markups in Canada: Have they changed and why?
Balance sheets of financial intermediaries: Do they forecast economic activity?
Belief dispersion and order submission strategies in the foreign exchange market
Sovereign default risk premia, fiscal limits and fiscal policy
Order flow segmentation, liquidity and price discovery: The role of latency delays
Measuring limits of Arbitrage in fixed-income markets
Limits to arbitrage and deviations from covered interest rate parity
Using speed and credit limits to address the procyclicality of initial margin at central counterparties
Limit theorems for limit order books
Die incremental order quantity : ein kritische Analyse
Optimal Continuous Order Quantity (s,s) Policies
Broker routing decisions in limit order markets
Markups in Canada: Have they changed and why?
Balance sheets of financial intermediaries: Do they forecast economic activity?
Belief dispersion and order submission strategies in the foreign exchange market
Sovereign default risk premia, fiscal limits and fiscal policy
Order flow segmentation, liquidity and price discovery: The role of latency delays
Measuring limits of Arbitrage in fixed-income markets
Limits to arbitrage and deviations from covered interest rate parity
Using speed and credit limits to address the procyclicality of initial margin at central counterparties
Limit theorems for limit order books
Die incremental order quantity : ein kritische Analyse