We develop a model of an order-driven exchange competing for order flow with off-exchange trading mechanisms. Liquidity suppliers face a trade-off between benefits and costs of order exposure. If they display trading intentions, they attract additional trade demand. We show, in equilibrium,...

We continue the analysis of optimal execution strategies in the model for a limit order book with nonlinear price impact and exponential resilience that was considered in Alfonsi, Schied, and Fruth (2009). We now allow for non-homogeneous resilience rates and arbitrary trading dates and consider...

Using the adoption of the Arrowhead trading platform in January 2010 as an exogenous event, we investigate the effects of algorithmic trading on stock market liquidity and commonality in liquidity under different market conditions on the Tokyo Stock Exchange. After controlling for endogeneity,...

We explore the relation between limit order price clustering and price efficiency. We find that executed sell limit orders cluster more frequently on round increments than buy limit orders and that this asymmetry in clustering is consistent with the well documented asymmetry in price response to...

Using the adoption of the Arrowhead trading platform in January 2010 as an exogenous event, we investigate the effects of algorithmic trading on stock market liquidity and commonality in liquidity under different market conditions on the Tokyo Stock Exchange. After controlling for endogeneity,...

This work's main purpose is to understand the price dynamics in a generic limit order market, and illustrate a dynamical trading mechanism that can be applied to explore its market microstructure. First and foremost, we capture the iterative nature of the limit order market, and quantitatively...