Some Effects of Restricting the Electronic Order Book in an Automated Trade Execution System

Publisher Website
Google Scholar
Abstract
The chapter uses computer simulations to study the effects of varying the length of an electronic order book within a particular automated trade execution system. It focuses on the length of the book. The chapter describes the number of bids or offers allowed to rest on the book at any instant in time in accordance with the priority rules governing the matching algorithm. It concentrates volatility, the bid-ask spread, and liquidity as performance measures. This emphasis is more in line with the literature on financial market microstructure, which tends to focus on observable characteristics of performance in working markets. The chapter finds the link forged between the length of the order book and degree of serial correlation in the variance of transactions returns. A new auction starts with each completed transaction and the priority of bids and offers does not carry over from auction to auction.

This publication has 1 reference indexed in Scilit: