In this scenario, if the ArcaBook fee gets too high, then customers will simply drop ArcaBook and pick up market data from some other exchange because the limit order books
across exchanges are highly correlated.
The average clustering frequency of the standing limit order book
was higher still, with an impressive 32.96% of displayable orders submitted at prices divisible by $0.05.
Instead, his limit order will be posted on the limit order book
. Because he is expressing his willingness to buy at $30.49, it becomes a bid for 200 shares at this price.
Auction markets typically use a centralized trading mechanism, such as a central (or consolidated) limit order book
, which permits buyers and sellers to trade with each other directly, without intermediation by dealers (Harris, 2003).
The authors interpret their results as evidence that a less than fully transparent limit order book
may enhance the welfare of market participants.
We show that trading volumes and other measures of market activity, like the depth of the limit order book
, have increased significantly since 2001.
Another way of resolving the coordination problem is to gather together all buy and sell orders in a limit order book
. Figure I(b) illustrates a market of this kind.
Panchapagesan, 2005, "The information content of the limit order book
: evidence from NYSE specialist trading decisions", Journal of Financial Markets, 8:25-67
In light of these judgments, I would caution against the implementation of a government mandate for any particular form of central limit order book
. Given the pace of change in our markets, it is difficult to contemplate how a government mandate could be implemented; systems might well be obsolete before we were halfway through the planning process.
And the resulting market - one that's fluid, fragmented and more fully automated - is crying out for a central limit order book
, according to "ECN Proliferation: All Roads Lead to a Central Limit Order Book
," a research note from TowerGroup, a Massachusetts-based consultancy.
About 15 to 20 billion ringgit worth of stock -- held by Singapore's Central Depository as trustee for Singapore-based investors who traded in Malaysian shares via the Stock Exchange of Singapore's Central Limit Order Book
(CLOB) -- is barred from being traded on the KLSE, even after the September 30 deadline.
The identification of spreads set by the specialist and spreads set by limit orders follows Jang and Venkatesh (JV) (1991), who find that spreads averaging less than or equal to $0.25 behave as if the quote is from the limit order book
, while spreads averaging greater than or equal to $0.375 behave as if the quote is for the specialist's own account.(1) Using the JV spread separation technique, for wider spreads, where the spread is more likely set by the specialist, we find the relationship between NYSE spread width and off board volume is consistently positive, indicating fragmentation effects dominate competition effects.