Order Dynamics in a High-Frequency Trading Environment

Posted: 22 Jun 2012 Last revised: 24 Feb 2013

See all articles by Arne Breuer

Arne Breuer

Hans-Peter Burghof

University of Hohenheim

Julian Stitz

affiliation not provided to SSRN

Date Written: July 14, 2011

Abstract

We analyse order book message data in order to detect algorithmic trade activity. Previous papers usually analyse order book data with a time stamp precision of one hundredth of a second. In times of co-location, those levels of precision are not sufficient to see effects of ultra-high frequency algorithms. Our Nasdaq-supplied dataset is equipped with a time stamp precision of a billionth of a second. Thus, we 'zoom in' and analyse the sub-millisecond effects of algorithmic trading on the order book. We find evidence of algorithmic trading with the limit order lifetime, limit order revision time, and inter order placement time. In addition to that, we apply the proxies separately on exchange-traded funds and stocks to see if structured products are treated differently than common stocks.

Keywords: Algorithmic Trading, High-Frequency Trading, Order Dynamics, Microseconds

JEL Classification: G10, G29

Suggested Citation

Breuer, Arne and Burghof, Hans-Peter and Stitz, Julian, Order Dynamics in a High-Frequency Trading Environment (July 14, 2011). Available at SSRN: https://ssrn.com/abstract=1927276 or http://dx.doi.org/10.2139/ssrn.1927276

Hans-Peter Burghof

University of Hohenheim ( email )

Schloss Hohenheim
510F
Stuttgart, 70599
Germany
+49 711 459 22900 (Phone)
+49 711 459 23448 (Fax)

Julian Stitz

affiliation not provided to SSRN

No contact information is available for Arne Breuer

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