<abstract xmlns="http://www.w3.org/1999/xhtml"><p>This work focuses on two of the more frequent practices in financial (especially capital) markets -the use of hidden orders and High-Frequency Trading (HFT). Although the use of each of them may reach 40% of the market turnover - even 60% for HFT, the actual knowledge on how they affect liquidity, prices, and market structure is still limited - especially if they are combined. The presence of both of these practices may look controversial, as it seems to be going in the opposite direction to what some of the goals that market regulators try to reach - transparency and increase of market liquidity. Additionally, their use suggests first, to give a clear advantage to some traders while not knowing the exact consequences to others. The aim of this paper is, by performing a literature study, to structure the current knowledge on a very specific topic in the area of market microstructure - the use of hidden orders and High-Frequency Trading. This paper tries to show the motivations, strategies, and eventual price effects behind hidden orders and High-Frequency Trading. It is also important to mention that this paper is based on scarce empirical research available (mainly for the US market) and as such, it is intended to encourage further analysis and research on this important topic.</p></abstract>

This work focuses on two of the more frequent practices in financial (especially capital) markets -the use of hidden orders and High-Frequency Trading (HFT). Although the use of each of them may reach 40% of the market turnover - even 60% for HFT, the actual knowledge on how they affect liquidity, prices, and market structure is still limited - especially if they are combined. The presence of both of these practices may look controversial, as it seems to be going in the opposite direction to what some of the goals that market regulators try to reach - transparency and increase of market liquidity. Additionally, their use suggests first, to give a clear advantage to some traders while not knowing the exact consequences to others. The aim of this paper is, by performing a literature study, to structure the current knowledge on a very specific topic in the area of market microstructure - the use of hidden orders and High-Frequency Trading. This paper tries to show the motivations, strategies, and eventual price effects behind hidden orders and High-Frequency Trading. It is also important to mention that this paper is based on scarce empirical research available (mainly for the US market) and as such, it is intended to encourage further analysis and research on this important topic.

Hidden and Fast Liquidity - Hidden Orders and High-Frequency Trading

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

{"article-title":"Hidden and Fast Liquidity - Hidden Orders and High-Frequency Trading"}

This work focuses on two of the more frequent practices in financial (especially capital) markets -the use of hidden orders and High-Frequency Trading (HFT)....

Hidden and Fast Liquidity - Hidden Orders and High-Frequency Trading

Publicado en línea: 31 mar 2020

Páginas: 27 - 35

Recibido: 31 ene 2020

Aceptado: 15 mar 2020

DOI: https://doi.org/10.2478/fiqf-2020-0004

Palabras clave
Limit book, hidden orders, High-Frequency Trading

© 2020 Martins Carlos Jorge Lenczewski, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Hidden and Fast Liquidity - Hidden Orders and High-Frequency Trading

Publicado en línea: 31 mar 2020

Páginas: 27 - 35

Recibido: 31 ene 2020

Aceptado: 15 mar 2020

DOI: https://doi.org/10.2478/fiqf-2020-0004

Palabras claveLimit book, hidden orders, High-Frequency Trading

© 2020 Martins Carlos Jorge Lenczewski, published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

Palabras clave
Limit book, hidden orders, High-Frequency Trading