We model a two-tiered market structure in which an investor can trade an asset on a trading platform with a set of dealers who in turn have access to an interdealer market. The investor's order is informative about the asset's payoff and dealers who were contacted by the investor use this...

We investigate how and why relative tick sizes influence traders' order strategies, and how this affects liquidity provision in the market. Using unique NYSE data, we find that a larger relative tick size benefits HFT market makers: they leave orders in the book longer, trade more aggressively,...

Trading activity surges associated with latency arbitrage are costly, as they lead to both lower liquidity and inefficient investments in order processing capacity that remains idle 90% of the time. A congestion message fee on liquidity-taking orders alleviates both concerns. The fee surges...

Colocation services offered by stock exchanges enable market participants to achieve execution costs for large orders that are substantially lower and less sensitive to transacting against high-frequency traders. However, these benefits manifest only for orders executed on the colocated brokers'...

This paper uses data from one of the most important European stock markets and shows that, in line with predictions from theoretical market microstructure, a small number of latent factors captures most of the variation in stock specific order books. We show that these order book commonalities...

We develop a model of limit order trading in which some traders have better information on future price volatility. As limit orders have option-like features, this information is valuable for limit order traders. We solve for informed and uninformed limit order traders' bidding strategies in...