Stepping out of the limit order book: Empirical evidence from the EBS FX market

Yoshida, Yushi and Susai, Masayuki (2016): Stepping out of the limit order book: Empirical evidence from the EBS FX market.

Abstract

Most limit orders exit the market as cancellations or revisions without a transaction. Using the EBS dataset, we can measure how long an individual limit order remains in the foreign exchange (FX) market. Thus, we use the measured lifetimes of canceled limit orders and find that post-order-placement changes in market price and limit order book depth affect cancellations, consistent with optimal behaviors that consider both order placement and order exit. FX dealers cancel their limit orders faster as the depth increases at better quotes. When market prices move away from their submitted quotes, patient dealers exhibit greater forbearance for their worsened position.

• Item Type: MPRA Paper
• Language: English
• Keywords: Foreign exchange market; Lifetime; Limit order; Market microstructure; Order book.
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates; G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency ; Event Studies ; Insider Trading; G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets

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