Arbeitspapier
On the dark side of the market: Identifying and analyzing hidden order placements
Trading under limited pre-trade transparency becomes increasingly popular on financial markets. We provide first evidence on traders' use of (completely) hidden orders which might be placed even inside of the (displayed) bid-ask spread. Employing TotalView-ITCH data on order messages at NASDAQ, we propose a simple method to conduct statistical inference on the location of hidden depth and to test economic hypotheses. Analyzing a wide cross-section of stocks, we show that market conditions reflected by the (visible) bid-ask spread, (visible) depth, recent price movements and trading signals significantly affect the aggressiveness of 'dark' liquidity supply and thus the 'hidden spread'. Our evidence suggests that traders balance hidden order placements to (i) compete for the provision of (hidden) liquidity and (ii) protect themselves against adverse selection, front-running as well as 'hidden order detection strategies' used by high-frequency traders. Accordingly, our results show that hidden liquidity locations are predictable given the observable state of the market.
- Sprache
-
Englisch
- Erschienen in
-
Series: CFS Working Paper ; No. 2012/04
- Klassifikation
-
Wirtschaft
Information and Market Efficiency; Event Studies; Insider Trading
Single Equation Models; Single Variables: Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
Financial Forecasting and Simulation
- Thema
-
Limit Order Market
Hidden Liquidity
High-Frequency Trading
Non-Display Order
Iceberg Orders
Wertpapierhandel
Marktliquidität
Börsenumsatz
Mikrostrukturanalyse
Aktienmarkt
USA
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Hautsch, Nikolaus
Huang, Ruihong
- Ereignis
-
Veröffentlichung
- (wer)
-
Goethe University Frankfurt, Center for Financial Studies (CFS)
- (wo)
-
Frankfurt a. M.
- (wann)
-
2012
- Handle
- URN
-
urn:nbn:de:hebis:30:3-240852
- Letzte Aktualisierung
-
10.03.2025, 11:41 MEZ
Datenpartner
Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Hautsch, Nikolaus
- Huang, Ruihong
- Goethe University Frankfurt, Center for Financial Studies (CFS)
Entstanden
- 2012
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