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Moinas, Sophie
(2010)
Hidden Limit Orders and Liquidity in Order Driven Markets.
TSE Working Paper, n. 10-147
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Abstract
This paper analyzes the rationale for the submission of hidden limit orders, and compares opaque and transparent limit order books. In my sequential model, the limit order trader may be informed with some probability. Both informed and large uninformed liquidity suppliers submit hidden orders in order to decrease the informational impact of their large orders, while ensuring a large trading volume. As they cannot adopt such a strategy in the transparent market, I find that pre-trade opacity improves market liquidity, and the welfare of the participants. My model further yields empirical predictions on the use and revelation of hidden orders in opaque markets.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | March 2010 |
| JEL Classification: | G10 - General G14 - Information and Market Efficiency; Event Studies G18 - Government Policy and Regulation |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSM Research (Toulouse), TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 18 Jan 2012 06:01 |
| Last Modified: | 02 Apr 2021 15:36 |
| OAI Identifier: | oai:tse-fr.eu:22439 |
| URI: | https://publications.ut-capitole.fr/id/eprint/3350 |
