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Regularities and irregularities in order flow data

Author

Listed:
  • Martin Theissen

    (Faculty of Physics, University of Duisburg-Essen)

  • Sebastian M. Krause

    (Faculty of Physics, University of Duisburg-Essen)

  • Thomas Guhr

    (Faculty of Physics, University of Duisburg-Essen)

Abstract

We identify and analyze statistical regularities and irregularities in the recent order flow of different NASDAQ stocks, focusing on the positions where orders are placed in the order book. This includes limit orders being placed outside of the spread, inside the spread and (effective) market orders. Based on the pairwise comparison of the order flow of different stocks, we perform a clustering of stocks into groups with similar behavior. This is useful to assess systemic aspects of stock price dynamics. We find that limit order placement inside the spread is strongly determined by the dynamics of the spread size. Most orders, however, arrive outside of the spread. While for some stocks order placement on or next to the quotes is dominating, deeper price levels are more important for other stocks. As market orders are usually adjusted to the quote volume, the impact of market orders depends on the order book structure, which we find to be quite diverse among the analyzed stocks as a result of the way limit order placement takes place.

Suggested Citation

  • Martin Theissen & Sebastian M. Krause & Thomas Guhr, 2017. "Regularities and irregularities in order flow data," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 90(11), pages 1-9, November.
  • Handle: RePEc:spr:eurphb:v:90:y:2017:i:11:d:10.1140_epjb_e2017-80087-6
    DOI: 10.1140/epjb/e2017-80087-6
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    References listed on IDEAS

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    1. Hautsch, Nikolaus & Huang, Ruihong, 2011. "Limit order flow, market impact and optimal order sizes: Evidence from NASDAQ TotalView-ITCH data," SFB 649 Discussion Papers 2011-056, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    2. Damian Eduardo Taranto & Giacomo Bormetti & Jean-Philippe Bouchaud & Fabrizio Lillo & Bence Toth, 2016. "Linear models for the impact of order flow on prices II. The Mixture Transition Distribution model," Papers 1604.07556, arXiv.org.
    3. Damian Eduardo Taranto & Giacomo Bormetti & Jean-Philippe Bouchaud & Fabrizio Lillo & Bence Toth, 2016. "Linear models for the impact of order flow on prices I. Propagators: Transient vs. History Dependent Impact," Papers 1602.02735, arXiv.org.
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    Cited by:

    1. Juan C. Henao-Londono & Sebastian M. Krause & Thomas Guhr, 2021. "Price response functions and spread impact in correlated financial markets," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 94(4), pages 1-20, April.

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