Order Cancellations, Fees, and Execution Quality in U.S. Equity Options

Todd G Griffith and Robert A Van Ness

The Review of Financial Studies, 2020, vol. 33, issue 4, 1534-1564

Abstract: We examine the effects of an order cancellation fee on limit order flow and execution quality in the PHLX options market. The cancellation fee on professional order flow effectively reduces the rate at which limit orders are canceled. Whereas the cancellation fee discourages the submission of nonmarketable orders, it encourages the submission of marketable orders. Consequently, nonmarketable order fill rates increase; marketable order fill speeds decrease; and bid-ask spreads widen. We also find slight increases in both dollar volume and market share.ReceivedMay 22, 2018; editorial decisionMay27, 2019 by Editor AndrewKarolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhz088 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:33:y:2020:i:4:p:1534-1564.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().