We show that wealth processes in the block-shaped order book model of Obizhaeva/Wang converge to their counterparts in the reduced-form model proposed by Almgren/Chriss, as the resilience of the order book tends to infinity. As an application of this limit theorem, we explain how to reduce...

Pervasive herding may cause homogenous trading patterns, both within and across stocks and thus may impact upon an important aspect of the market microstructure – liquidity. Potentially, herding could simultaneously affect the liquidity of both individual stocks and that of the market. For...

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...

Since European trading now traverses national boundaries, and MTFs are rampant, how have the stock price dynamics changed? Analysing the execution channels NYSE Euronext Paris, Chi-X and BATS in CAC40 stocks, we compare metrics of market efficiency pre/post-MiFID and provide insight into the...

A number of recent theoretical studies have explored trading in fragmented markets, e.g. Biais etal. (2000), a phenomenon increasingly witnessed in modern markets. The key assumptiongenerating the results is that there is at least one liquidity demander exploiting access to allmarkets by...

We investigate competition between traditional stock exchanges and new ‘dark' trading venues using an important difference in regulatory treatment. SEC required minimum pricing increments constrain some stock spreads, causing large limit order queues. Dark pools allow some traders to by-pass...

We directly compare retail investor execution costs with exchange execution costs. We find off-exchange retail trades execute at lower effective spreads than comparable exchange trades, primarily due to the uninformed nature of retail trades. These results hold when payment for order flow (PFOF)...

Abstract I demonstrate an important tension between acquiring information and incorporating it into asset prices. As a salient case, I analyze the rise of algorithmic trading (AT), which is typically associated with improved price efficiency. Using a new measure of the information content of...

Cross-asset market activity can be a channel through which illiquidity risks originating in one market can propagate to others. This paper examines the complex intra-day linkages between the U.S. equity securities market and the equity derivatives market using high-frequency data on S&P 500...

This paper provides statistical learning techniques for determining the full own-price market impact and the relevance and effect of cross-price and cross-asset spillover channels from intraday transactions data. The novel tools allow extracting comprehensive information contained in the limit...