We develop a model of an order-driven exchange competing for order flow with off-exchange trading mechanisms. Liquidity … additional trade demand. We show, in equilibrium, hiding trade intentions can induce mis-coordination between liquidity supply … in prices and order flow after periods of high excess-supply of hidden liquidity. …

We model the interactions between the trading activities of a large investor, the stock price and the market liquidity …. Our framework generalizes the model of Frey (2000), where liquidity is constant by introducing a stochastic liquidity … vary due to changes in liquidity. Features of our model are demonstrated using Monte Carlo simulation for different …