The Information Content of Special Orders
37 Pages Posted: 5 Jun 2016
Date Written: May 9, 2016
We consider the role of special orders in informed traders’ order submission strategies and their effect on the market price discovery process. Special orders, such as Fill-or-Kill and All-or-Nothing orders, are not entered in the order book; instead, they are executed immediately. This means they do not require costly monitoring and are not visible to other traders. Due to the fact that informed institutional traders, including high-frequency traders, use aggressive special orders, they generate higher price impacts than normal orders, particularly in volatile markets.
Keywords: Fill-and-Kill orders, All-or-Nothing orders, Institutional Investors, Price Impact, High Frequency Trading
JEL Classification: C35, G15, G25, G29
Suggested Citation: Suggested Citation