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

Hans Degryse, Rudy De Winne, Carole Gresse () and Richard Payne
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Hans Degryse: DePaul University
Rudy De Winne: Université catholique de Louvain, LIDAM/LFIN, Belgium
Carole Gresse: Université catholique de Louvain, LIDAM/LFIN, Belgium

No 2025014, LIDAM Reprints LFIN from Université catholique de Louvain, Louvain Finance (LFIN)

Abstract: Employing unique data from 91 stocks trading on their primary exchanges and three alternative venues, we show that liquidity suppliers post duplicate limit orders on competing trading venues and cancel the duplicated orders immediately after one of them is filled. This is consistent with liquidity suppliers engaging in crossvenue market making. This duplicated-then-canceled liquidity is predominantly used by high-frequency traders when their inventories are not excessive. It reduces 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.

Keywords: High-frequency trading; algorithmic trading; fragmentation; limit order duplication; order cancellation (search for similar items in EconPapers)
Pages: 27
Date: 2025-11-20
Note: In: Management Science, 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ajf:louvlr:2025014

DOI: 10.1287/mnsc.2023.01789

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