Algorithmic Trading Patterns in Xetra Orders

Johannes Prix, Otto Loistl and Michael Huetl

The European Journal of Finance, 2007, vol. 13, issue 8, 717-739

Abstract: Computerized trading controlled by algorithms - “Algorithmic Trading” - has become a fashionable term in investment banking. We investigate a set of Xetra order data to find traces of algorithmic trading by studying the lifetimes of cancelled orders. Even though it is widely agreed that an algorithm must randomize its order activities to avoid exploitation by other traders, we still find systematic patterns in the submission and cancellation of certain Xetra orders, indicating the activity of algorithmic trading. The trading patterns observed might be interpreted as fishing for profitable roundtrips.

Keywords: Market microstructure; algorithmic trading; cancellations; order lifetime; Xetra (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (11)

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DOI: 10.1080/13518470701705538

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