Characteristics of the order flow through an electronic open limit order book |
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| Authors: | Philip Brown Nathanial Thomson David Walsh |
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| Institution: | a Department of Accounting and Finance, University of Western Australia, Nedlands WA 6907, Australia;b State Street Global Advisors, Level 44, Gateway, 1 Macquarie Place Sydney 2000, Australia |
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| Abstract: | We estimate and examine certain characteristics of the order flow through an electronic open limit order book, using order (not trade) data. In doing this, we bring out new evidence on order flow from a market with microstructure different from that of the NYSE. We find that the proportion of informed orders is less than 10%, lower than previous estimates. Informed traders choose smaller orders than uninformed traders, but do not materially differ in their choice of limit or market orders. The proportion of informed investors is similar between good and bad news days. Finally, there are U-shaped intraday patterns in order arrival, and the information content of the order flow appears to follow this pattern across the day. |
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| Keywords: | Order flow Trade process Electronic open limit order book |
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