Please use this identifier to cite or link to this item: https://ir.iimcal.ac.in:8443/jspui/handle/123456789/936
Title: Do the limit orders of proprietary and agency algorithmic traders discover or obscure security prices?
Authors: Nawn, Samarpan
Banerjee, Ashok
Keywords: HFT
Limit orders
Market manipulation
Quote
Issue Date: 2019
Publisher: SCOPUS
Journal of Empirical Finance
Elsevier B.V.
Series/Report no.: 53
Abstract: We investigate the relative roles of limit orders from proprietary algorithmic traders (PAT), agency algorithmic traders (AAT) and non-algorithmic traders (NAT) in the discovery of security prices in National Stock Exchange (NSE) of India. Our results suggest that PAT's limit orders are most informative, however, AAT and NAT still contribute substantially to price discovery. Contrary to popular belief that algorithmic traders are only interested in large stocks, we find that two algorithmic trading groups together contribute nearly 30%�40% of the price discovery in both small and medium capitalization stocks whereas their combined share of trading volume only ranges between 10%�15% in these stocks. We see that price discovery contribution of PAT's limit orders increase when we conduct our analysis at longer time gaps. This finding is evidence against the popular notion that HFTs only make prices informative in the very short run. We also find that LOB imbalance of PAT is most informative among three groups of traders and find no evidence to support the popular notion that fast traders often use limit orders to �spoof� market participants about future price movements. However, much of the informativeness of PAT LOB imbalance withers away when PAT places orders opposite to rest of the market suggesting that rather than generating information PAT possibly uses information produced by others.
Description: Nawn, S., Department of Finance and Accounting, Indian Institute of Management, Udaipur, Balicha, Udaipur, Rajasthan Pin code 313001, India; Banerjee, A., Department of Finance and Control, Indian Institute of Management, Calcutta, Diamond Harbour Road, Joka, West Bengal Pin code 700104, India
ISSN/ISBN - 09275398
pp.109-125
DOI - 10.1016/j.jempfin.2019.06.003
URI: https://www.scopus.com/inward/record.uri?eid=2-s2.0-85068599629&doi=10.1016%2fj.jempfin.2019.06.003&partnerID=40&md5=ee368b0407a04c0ab2ed70dc70dc7b9c
https://ir.iimcal.ac.in:8443/jspui/handle/123456789/936
Appears in Collections:Finance and Control

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