Synopsis E-book: Bid Ask Spreads
A clear trend in securities exchange design is towards the introduction of electronic limit order book systems for equities, derivatives, and bonds. This development has generated a growing literature on order flow and its contribution to market activity and price formation.1 We analyze the links between information observed through the system by traders, order placement behavior, and the probability structure of the bid-ask spread in this paper. We are particularly interested in whether information on the characteristics of resting orders on the book influences trader behavior and pricing, over and above information available through the flow of trader activity. The question is relevant in debates over disclosure of order information in markets more generally.2 The investigation here proceeds in three steps, using intraday data on stock index futures trading in a pure limit order book market.
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| FileName: Bid Ask Spreads |
| Author: Mark Coppejans |
| Language: English |
| Size: 130 kb |
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| FileType: .pdf |
