Quasi-Centralized Limit Order Books
Abstract
A quasi-centralized limit order book (QCLOB) is a limit order book (LOB) in which financial institutions can only access the trading opportunities offered by counterparties with whom they possess sufficient bilateral credit. We perform an empirical analysis of a recent, high-quality data set from a large electronic trading platform that utilizes QCLOBs to facilitate trade. We find many significant differences between our results and those widely reported for other LOBs. We also uncover a remarkable empirical universality: although the distributions describing order flow and market state vary considerably across days, a simple, linear rescaling causes them to collapse onto a single curve. Motivated by this finding, we propose a semi-parametric model of order flow and market state in a QCLOB on a single trading day. Our model provides similar performance to that of parametric curve-fitting techniques, while being simpler to compute and faster to implement.
Keywords
Cite
@article{arxiv.1502.00680,
title = {Quasi-Centralized Limit Order Books},
author = {Martin D. Gould and Mason A. Porter and Sam D. Howison},
journal= {arXiv preprint arXiv:1502.00680},
year = {2016}
}
Comments
43 pages, 18 figures