The use of undisclosed limit orders on the Australian Stock Exchange |
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| Institution: | 1. University of Sydney, Sydney, NSW 2006, Australia;2. Department of Accounting and Finance, University of Auckland, Private bag 92019, Auckland, New Zealand;1. Department of Environmental Chemistry and Bioanalytics, Faculty of Chemistry, Nicolaus Copernicus University, Gagarin 7, 87-100 Torun, Poland;2. Australian Centre for Research on Separation Science (ACROSS), School of Natural Sciences-Chemistry, University of Tasmania, Private Bag 75, Hobart, Tasmania, 7001, Australia;1. Finance Center Muenster, University of Muenster, Universitaetsstr. 14-16, 48143 Muenster, Germany;2. Mercator School of Management, University of Duisburg–Essen, Lotharstr. 65, 47057 Duisburg, Germany;1. Department of Earth Sciences, National Cheng Kung University, 1st University Road, Tainan, 70101, Taiwan;2. Department of Pharmacology, Room 5-D, Tupper Medical Building,5850 College Street, Dalhousie University, Halifax, NS, B3H 4R2, Canada;1. Analytical Sciences – Discovery Sciences, Janssen Research & Development, a Division of Janssen-Cilag, Campus de Maigremont, CS10615, F-27106 Val de Reuil Cedex, France;2. Normandie Université, Laboratoire SMS – EA3233, Université de Rouen, F-76281, Mont Saint Aignan, France;3. Normandie Université, UNIROUEN, INSA Rouen, CNRS, COBRA, 76000 Rouen, France;4. Analytical Sciences – Discovery Sciences, Janssen Research & Development, a division of Janssen Pharmaceutica NV, Turnhoutseweg 30, B 2340 Beerse, Belgium |
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| Abstract: | This paper investigates the use of undisclosed limit orders on the Australian Stock Exchange (ASX). Our findings suggest that undisclosed limit orders are used to reduce the option value of limit orders. We find no evidence that undisclosed limit orders are more frequently used by informed traders than disclosed limit orders. The effects of recent changes in undisclosed order regulation are also examined. We find that the enhancement in pre-trade transparency, through tightening the undisclosed order regulation in October 1994, resulted in a significant decline in trading volume. The impact of the second regulation change in October 1996, which further tightened undisclosed order regulation, resulted in a less significant trading volume reduction. |
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