Algorithmic trading behaviour and high-frequency liquidity withdrawal in the FX spot market

Alexis Stenfors, Masayuki Susai

Research output: Working paper

Abstract

This paper studies the frequency and speed of limit order cancellations in the FX spot market for EUR/USD, USD/JPY and EUR/JPY. By investigating both ‘market-specific’ and ‘order-specific’ drivers of liquidity withdrawal, we report several
findings that could serve to question traditional market microstructure theory as well as conventional anecdotes from financial market participants. Overall, it appears as if limit orders with characteristics more likely to be submitted by algorithmic traders are perceived to be more informed or predatory than orders submitted human traders -thus acting to trigger more, and faster, limit order cancellations.
Original languageEnglish
PublisherUniversity of Portsmouth
Pages1-55
Publication statusPublished - 1 May 2017

Publication series

NameWorking Papers in Economics & Finance

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