ORDER PLACEMENT STRATEGIES IN A PURE LIMIT ORDER BOOK MARKET

Charles Cao, Oliver Hansch and Xiaoxin Wang

Journal of Financial Research, 2008, vol. 31, issue 2, 113-140

Abstract: Using order book information from the Australian Stock Exchange (ASX), we examine whether (and to what extent) the order book affects investors' order placement strategies. We find that the top of the book always affects order submissions, cancellations, and amendments, and the rest of the book mostly affects order cancellations and amendments. The previously documented order submission aggressiveness, given a crowded first step of the book, persists to other price steps and is found in order amendments and cancellations along the book. Finally, investors tend to fill in the large price gaps in the book by submitting or amending orders.

Date: 2008
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