We examine the effect of high frequency trading on market quality from theperspective of a limit order trader. By competing with slower limit order traders, highfrequency traders (HFT) impose a welfare externality by crowding out slower non-HFTlimit orders. The order book imbalance immediately...

When examining information flow into prices, empirical literature usually focusses on direct conduits such as order submissions. Meanwhile, theory suggests that market conditions should have substantial additional effects. Empirical analyses of such effects are methodologically challenging and...

We explore the effects of a "tick size war" where European exchanges competed directly on the minimum pricing increment in the limit order book, the tick size. We find exchanges that reduced their tick size immediately captured market shares of quoted and executed volume from exchanges that kept...

Errors in variables in linear regression continue to be a major empirical issue in financial econometrics. We propose a method using the characteristic function (CF) to obtain estimates for linear models with errors in the variables. By assuming that the explanatory variable follows a flexible...

We use a novel machine learning approach to tackle the problem of limit order management. Applying our framework to data, we show that the most important variable for a trader to consider is the price level of their order, followed by the queue sizes of the order book, volatility and finally...