Is faster or slower trading better? An examination of order type execution speed and costs

Ryan Garvey, Tao Huang and Fei Wu

European Financial Management, 2021, vol. 27, issue 2, 326-363

Abstract: We examine order type execution speed and costs for US equity traders. Marketable orders that execute slower exhibit lower execution costs. Those who remove liquidity faster and pay higher trading costs transact in smaller size, spread trading across more venues, take more liquidity, and are better informed. Nonmarketable limit orders that execute slower exhibit greater adverse selection; and larger, uninformed traders who concentrate their trading in fewer venues submit them. Our findings suggest that slowing down the trading process, when faster options exist, can benefit certain market participants who seek to cross the bid–ask spread.

Date: 2021
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