1-Share Orders and Trades

32 Pages Posted: 12 Oct 2014 Last revised: 26 Apr 2018

See all articles by Ryan Davis

Ryan Davis

University of Alabama at Birmingham

Brian Roseman

Oklahoma State University

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Date Written: October 8, 2016

Abstract

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 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 support 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.

Keywords: One Share trades; One Share orders; trades; orders; NASDAQ

JEL Classification: G10; G14

Suggested Citation

Davis, Ryan and Roseman, Brian and Van Ness, Bonnie F. and Van Ness, Robert A., 1-Share Orders and Trades (October 8, 2016). Journal of Banking and Finance, Vol. 75, 2017. Available at SSRN: https://ssrn.com/abstract=2508352 or http://dx.doi.org/10.2139/ssrn.2508352

Ryan Davis

University of Alabama at Birmingham ( email )

Birmingham, AL 35294
United States

Brian Roseman

Oklahoma State University ( email )

Stillwater, OK 74078
United States

Bonnie F. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)

Robert A. Van Ness (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

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