Not Held Orders: Evidence on the Value of Order Timing in an Equity Market

42 Pages Posted: 11 Dec 2000

See all articles by Puneet Handa

Puneet Handa

University of Iowa - Department of Finance

Robert A. Schwartz

Baruch College - CUNY

Ashish Tiwari

University of Iowa

Date Written: August 2000

Abstract

This paper assesses the value of order timing in equity trading, with particular focus on the working of "not held" orders by floor brokers. To this end, we examine trades on the American Stock Exchange (Amex) using October 1996 proprietary trade and quote data for 838 stocks. Recognizing that access costs to the floor are relatively high, we compare the temporary price impact of orders handled by floor brokers with that of orders entered through the Amex's Post Execution Reporting (PER) system. We find that orders handled by floor brokers have a smaller temporary price impact than do PER orders (on average, 1.45 cents per share versus 3.29 cents per share). We also find that orders placed on the trading floor have higher information content, as measured by the permanent price impact of orders (on average, 5.90 cents per share versus 3.27 cents per share). The findings have implications for the development of electronic trading platforms for institutional participants concerned with controlling the market impact of their large orders.

Keywords: Price impact, order timing, trading floor

Suggested Citation

Handa, Puneet and Schwartz, Robert A. and Tiwari, Ashish, Not Held Orders: Evidence on the Value of Order Timing in an Equity Market (August 2000). Available at SSRN: https://ssrn.com/abstract=242018 or http://dx.doi.org/10.2139/ssrn.242018

Puneet Handa

University of Iowa - Department of Finance ( email )

Tippie College of Business, 108 PBB
Iowa City, IA 52242
United States
319-335-2731 (Phone)
319-335-3690 (Fax)

Robert A. Schwartz

Baruch College - CUNY ( email )

Zicklin School of Business
17 Lexington Avenue
New York, NY 10010
United States
646-312-3467 (Phone)
646-312-3530 (Fax)

Ashish Tiwari (Contact Author)

University of Iowa ( email )

Finance Department
Henry B. Tippie College of Business, 108 PBB
Iowa City, IA 52242
United States
(319) 353-2185 (Phone)
(319) 335-3690 (Fax)

HOME PAGE: https://tippie.uiowa.edu/people/ashish-tiwari

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