Asymmetric statistics of order books: The role of discreteness and evidence for strategic order placement

Abstract

We show that the statistics of spreads in real order books is characterized by an intrinsic asymmetry due to discreteness effects for even or odd values of the spread. An analysis of data from the NYSE order book points out that traders' strategies contribute to this asymmetry. We also investigate this phenomenon in the framework of a microscopic model and, by introducing a non-uniform deposition mechanism for limit orders, we are able to quantitatively reproduce the asymmetry found in the experimental data. Simulations of our model also show a realistic dynamics with a sort of intermittent behavior characterized by long periods in which the order book is compact and liquid interrupted by volatile configurations. The order placement strategies produce a non-trivial behavior of the spread relaxation dynamics which is similar to the one observed in real markets.

18 pages, 12 figures

References in corpus (5)

• Critical comparison of several order-book models for stock-market fluctuations
• Studies of the limit order book around large price changes
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• The limit order book on different time scales
• Market efficiency and the long-memory of supply and demand: Is price impact variable and permanent or fixed and temporary?

Cited by in corpus (4)

• A Multi Agent Model for the Limit Order Book Dynamics
• Modeling the coupled return-spread high frequency dynamics of large tick assets
• Liquidity crises on different time scales
• Modeling non-stationarities in high-frequency financial time series