We analyze limit order markets and floor exchanges, assuming an informed trader and discretionary liquidity traders use market orders and can either submit block orders or work their demands as a series of small orders. By working their demands, large market order traders pool with small traders. We show that every equilibrium on a floor exchange must involve at least partial pooling. Moreover, there is always a fully pooling (worked order) equilibrium on a floor exchange that is equivalent to a block order equilibrium in a limit order market.

Baruch, S.n., Back, K. (2007). Working orders in limit order markets and floor exchanges. THE JOURNAL OF FINANCE, 62(4), 1589-1621 [10.1111/j.1540-6261.2007.01252.x].

Working orders in limit order markets and floor exchanges

Shmuel Baruch;
2007-01-01

Abstract

We analyze limit order markets and floor exchanges, assuming an informed trader and discretionary liquidity traders use market orders and can either submit block orders or work their demands as a series of small orders. By working their demands, large market order traders pool with small traders. We show that every equilibrium on a floor exchange must involve at least partial pooling. Moreover, there is always a fully pooling (worked order) equilibrium on a floor exchange that is equivalent to a block order equilibrium in a limit order market.
2007
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/09 - FINANZA AZIENDALE
English
Baruch, S.n., Back, K. (2007). Working orders in limit order markets and floor exchanges. THE JOURNAL OF FINANCE, 62(4), 1589-1621 [10.1111/j.1540-6261.2007.01252.x].
Baruch, Sn; Back, K
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/313786
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