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1.
1-share trades are the most common odd lot trade size, accounting for 9.62% of all odd lot transactions and 3.65% of all trades on NASDAQ in 2012. While 50.41% of 1-share trades result from broken orders, 34.89% of 1-share trades are intentional. We provide substantial evidence that traders use 1-share trades to “ping” for hidden liquidity. In particular, our results indicate that 1-share trades are disproportionately aggressive and also execute against hidden liquidity more than any other odd lot trade size. We also find a relative increase in trading immediately following a 1-share trade. Our results are in line with Clark-Joseph (2014), who suggests that traders may use small, unprofitable trades to detect information from other traders. Specifically, 1-share trades represent the minimum cash outlay necessary to trade, while simultaneously producing the smallest possible effects on a market maker's inventory, and in turn, a security's price.  相似文献   

2.
Local market makers, liquidity and market quality   总被引:1,自引:0,他引:1  
We examine the role of geographically proximate (local) market makers in providing liquidity and improving the quality of a dealer market. Firms with active participation of local dealers enjoy lower quoted and effective spreads, as well as more informative prices. The beneficial effects from local market makers are not confined to a few “top” local dealers and they cannot be attributed to their participation in the firm's IPO syndicate or industry specialization. Further, we find that days with aggressive bidding from local market makers relative to their non-local counterparts are associated with significant positive abnormal returns, consistent with local market makers possessing information advantages. In summary, our results suggest that the information advantages of local market makers may be a contributing factor to the reduction in the cost of trading.  相似文献   

3.
Reserve orders enable traders to hide a portion of their orders and now appear in most electronic limit order markets. This paper outlines a theory to determine an optimal submission strategy in a limit order book, in which traders choose among limit, market, and reserve orders and simultaneously set price, quantity, and exposure. We show that reserve orders help traders compete for the provision of liquidity and reduce the friction generated by exposure costs. Therefore, total gains from trade increase. Large traders always benefit from reserve orders, whereas small traders benefit only when the tick size is large.  相似文献   

4.
We present a market microstructure model to examine specialist's strategic participation decisions in a security market where there are noise traders, limit order traders, an insider and a specialist. We argue that the specialist's participation rate depends on the depth of the limit book and its uncertainty. In particular, the specialist has incentives to trade against the market trend when the limit book depth is low and to trade with the market trend when the depth is high. Moreover, the specialist's participation rate is positively related to the limit book depth uncertainty and the asset price volatility, but is negative related to the average trading volume. We also discuss the specialist's participation strategies under the NYSE regulation that prohibits the specialist from trading with the market trend.  相似文献   

5.
In this paper, we examine a trader's order choice between market and limit orders using a sample of orders submitted through NYSE SuperDot. We find that traders place more limit orders relative to market orders when: (1) the spread is large, (2) the order size is large, and (3) they expect high transitory price volatility. A rise in informational volatility appears neither to increase nor decrease the placement of limit orders. We also find that a rise in lagged price volatility decreases the size of spread, which is driven by the increase in the placement of limit orders.  相似文献   

6.
This paper measures and compares the tail risks of limit and market orders using Extreme Value Theory. The analysis examines realised tail outcomes using the Dealing 2000-2 electronic broking system based on completed transactions rather than the more common analysis of indicative quotes. In general, limit and market orders exhibit broadly similar tail behaviour, but limit orders have significantly heavier tails and larger tail quantiles than market orders.  相似文献   

7.
The mandatory disclosure of trades and market liquidity   总被引:9,自引:0,他引:9  
Financial market regulations require various 'insiders' to disclosetheir trades after the trades are made. We show that such mandatorydisclosure rules can increase insiders' expected trading profits.This is because disclosure leads to profitable trading opportunitiesfor insiders even if they possess no private information onthe asset's value. We also show that insiders will generallynot voluntarily disclose their trades, so for disclosure tobe forthcoming, it must be mandatory. Key to the analysis isthat the market cannot observe whether an insider is tradingon private information regarding asset value of is trading forpersonal portfolio reasons.  相似文献   

8.
Recent work in the market microstructure literature suggests that the speed with which orders arrive in the market impacts traders' order submission decisions. In this study we use an asymmetric autoregressive conditional duration (ACD) model to empirically investigate the influence on the submission of limit and market orders of changes in the time between the past submissions of different types of orders, changes in the slope of the limit order book, and changes in price uncertainty. We find that the expected time between the arrivals of successive orders in the foreign exchange market depends on the previous type of order submitted and the slope on both sides of the order book. Price uncertainty (volatility) plays a secondary role after accounting for the impact of changes in the slope of the order book. Lastly, we find that there are fundamental changes in the level of information contained in the submission of orders at the opening and closing of markets.  相似文献   

9.
Liquidity provision with limit orders and a strategic specialist   总被引:12,自引:0,他引:12  
This article presents a microstructure model of liquidity provisionin which a specialist with market power competes against a competitivelimit order book. General solutions, comparative statics andexamples are provided first with un-informative orders and thenwhen order flows are informative. The model is also used toaddress two optimal market design issues. The first is the effectof 'tick' size - for example, eighths versus decimal pricing- on market liquidity. Institutions trading large blocks havea larger optimal tick size than small retail investors, butboth prefer a tick size strictly greater than zero. Second,a hybrid specialist/limit order market (like the NYSE) providesbetter liquidity to small retail and institutional trades, buta pure limit order market (like the Paris Bourse) may offerbetter liquidity on mid-size orders.  相似文献   

10.
This paper examines the forecasting performance of GARCH option pricing models from a market momentum perspective, and the possible impacts of financial crises and business conditions are also examined. The empirical results demonstrate that market momentum impacts the forecasting performance of GARCH option pricing models. The EGARCH model performs better under downward market momentum, while the standard GARCH performs better under upward market momentum. In addition, parsimonious models generally outperform richly parameterized ones. The above findings are robust to financial crises, and the results further demonstrate that business conditions influence the forecasting performance of GARCH option pricing models.  相似文献   

11.
2011年1月1日起,国家外汇管理局出台的《银行间外汇市场做市商指引》(汇发[2010]46号)正式施行,中国外汇交易中心积极配合做好现有做市商自动承继即期做市商资格工作,并帮助获批远期掉期做市商资格的机构提前完成做市准备等相关工作,同时协助获批的即期尝试做市机构和远期掉期尝试机构进行尝试做市的各  相似文献   

12.
This paper is divided into two distinct parts. Part I, Empirical Evidence, tests a previously formulated variance, thinness relationship for security returns. First quarter 1972 daily returns variance is regressed on market value of shares, share price, trading activity, sales variance, and institutional holdings for 178 firms selected by stratified random sampling from AMEX and NYSE (specialist exchanges), and from Tokyo and Rio de Janeiro (non-specialist exchanges). The principal finding is that returns variance and market value are inversely related on non-specialist exchanges, but not on specialist exchanges; this difference is attributed to specialists' impact. Part II, Policy Proposals, discusses the manner in which designated market makers may be effectively incorporated into a continuous auction exchange. Issues discussed include: desirability of price stabilization, transfers implicit in the existing U.S. specialist system, consolidation and public availability of the limit order book, number of designated market makers for a security, competitive bidding, and compensation for performing the price stabilization function. Stabilization is modeled as an external economy, and specific policy proposals for internalizing it are advanced.  相似文献   

13.
We call markets in which intermediaries sell networks of suppliers to consumers who are uncertain about their needs "option demand markets." In these markets, suppliers may grant the intermediaries discounts in order to be admitted to their networks. We derive a measure of each supplier's market power within the network; the measure is based on the additional ex ante expected utility consumers obtain from the supplier's inclusion. We empirically validate the WTP measure by considering managed care purchases of hospital services in the San Diego market. Finally, we present three applications, including an analysis of hospital mergers in San Diego.  相似文献   

14.
《Pacific》2007,15(2):173-194
This study shows that the information content of FX transactions depends on the identity of market participants. Using spot FX transactions of a major Australian bank, we find that central banks have the greatest price impact, followed by non-bank financial institutions (NBFIs) such as hedge funds and mutual funds. Trades by non-financial corporations have the least impact on dealer pricing. In the interbank market, dealers with greater private information tend to choose direct trading which has lower post-trade transparency. Indirect trading via brokers is partially revealed to the market and has little price impact. The price impact largely comes from institutions in the top quartile of the trading volume. Furthermore, NBFIs have the greatest propensity for herding, followed by interbank dealers. Non-financial corporations do not herd in their trades. Except for central banks, the differential impact of market participants can largely be explained by their propensity for herding.  相似文献   

15.
This article presents a pure exchange economy that extends Rubinstein (1976) to show how the jump-diffusion option pricing model of Merton (1976) is altered when jumps are correlated with diffusive risks. A non-zero correlation between jumps and diffusive risks is necessary in order to resolve the positively sloped implied volatility term structure inherent in traditional jump diffusion models. Our evidence is consistent with a negative covariance, producing a non-monotonic term structure. For the proposed market structure, we present a closed form asset pricing model that depends on the factors of the traditional jump-diffusion models, and on both the covariance of the diffusive pricing kernel with price jumps and the covariance of the jumps of the pricing kernel with the diffusive price. We present statistical evidence that these covariances are positive. For our model the expected stock return, jump and diffusive risk premiums are non-linear functions of time.  相似文献   

16.
I apply the bivariate Autoregressive Conditional Duration model of Engle and Lunde [2003. Trade and quotes: a bivariate point process. Journal of Financial Econometrics 1, 159–188] to stock and option market transactions. The first model uses option trades and stock trades. Shocks to option trade/option trade durations have a significant impact on option trade/stock trade durations. Higher implied volatility, larger stock and option market order imbalances, larger stock trades, larger spreads, smaller depths in the stock market and faster trading in the stock and option markets are all associated with faster trading in both markets. In the second model, option trade/option trade timing leads option trade/stock quote timing and several information-related stock and option market covariates impact the expected inter-market event durations.  相似文献   

17.
The ideas presented in this paper are those of the authors and not necessarily reflect the views of the National bank of Canada. Both authors thank the National Bank of Canada and the SSHRC of Canada for their help. Thanks are also due to Professor Y. Tian for his comments, and for participating, together with students of the Financial Engineering program at York University, in the data preparation and the execution of the Matlab programs. In this paper, we propose a necessary and sufficient condition for bid and ask prices of European options to be free of arbitrage, and derive from it an efficient numerical methodology to determine its satisfaction by a given set of prices. If the bid and ask prices satisfy the no-arbitrage (NA) condition, our methodology produces a vector of NA prices that lie between the bid and ask prices. Otherwise, our methodology generates a vector of arbitrage-free prices that is as close as possible, in some sense, to the bid–ask strip. The arbitrage-free prices detected by our methodology render the commonly used practice of using mid-points and then ‘cleaning’ arbitrage from them as unnecessary. Moreover, a vector of ‘cleaned’ prices obtained from mid-point prices may be outside the bid–ask spread even in an arbitrage-free market and, hence, in this case will not be representative of the current market. A new procedure of estimating implied valuation operators is also suggested here. This procedure is rooted in the economic properties of put and call prices and is based on Phillips and Taylor's approximation of a convex function. This approach is superior to common estimation techniques in that it produces an analytical expression for the implied valuation operator and is not data intensive as some other studies. Empirical findings for the new methods are documented and their economic implications are discussed.  相似文献   

18.
An analysis is given of the effect of market makers on liquidity using a transaction-level database. For this purpose, the focus is on a financial market where a change in regulations created explicitly the category of market maker in 1997 and that date is used to construct a pseudo-experiment. In contrast with other studies that use ultrahigh frequency data, the days to be analysed are selected using a statistical procedure to match observations before and after the change in regulation. The propensity score is used to perform the matching. After choosing the days, an estimate of an ordered probit model is made to explain the intraday behaviour of price changes. The coefficient estimates from the ordered probit model are used to calculate a measure of liquidity based on the steepness of the response function of price changes to volume. The results show that liquidity, measured in this way, has not been affected by the introduction of the market makers.  相似文献   

19.
交易机制与价格发现的关系一直是金融市场微观结构的重要研究方向,其目的是为了发现金融市场如何借由微观行为的不均衡实现市场层面的价格均衡过程。事实上,交易机制、交易习惯和市场均衡过程三者之间是相互影响的关系。分析和研究这三者的内在联系可以加深我们对市场的理解,并找到提高市场资源配置效率的途径。文章以做市报价收益率点差作为研究对象,详细分析了其时间分布、相关性、波动性及时间持续性等微观特征,为深入研究做市商报价和交易行为提供各种可能的切入点。  相似文献   

20.
Option replication is studied in a discrete-time framework with proportional transaction costs. The model represents an extension of the Cox-Ross-Rubinstein binomial option-pricing model to cover the case of proportional transaction costs for one risky asset with different interest rates on bank credit and deposit. Contingent claims are supposed to be 2-dimensional random variables. Explicit formulas for self-financing strategies are obtained for this case.Received: March 2004, Mathematics Subject Classification (2000): 62P05JEL Classification: G11, G13The authors are grateful to an anonymous referee for numerous helpful comments and to Yulia Romaniuk for final corrections. The paper was partially supported by grant NSERC 264186.  相似文献   

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