TY  - UNPD
A1  - Cebiroglu, Gökhan
A1  - Hautsch, Nikolaus
A1  - Horst, Ulrich
T1  - Order exposure and liquidity coordination: does hidden liquidity harm price efficiency?
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 468
N2  - We develop a model of an order-driven exchange competing for order flow with off-exchange trading mechanisms. Liquidity suppliers face a trade-off between benefits and costs of order exposure. If they display trading intentions, they attract additional trade demand. We show, in equilibrium, hiding trade intentions can induce mis-coordination between liquidity supply and demand, generate excess price fluctuations and harm price efficiency. Econometric high-frequency analysis based on unique data on hidden orders from NASDAQ reveals strong empirical support for these predictions: We find abnormal reactions in prices and order flow after periods of high excess-supply of hidden liquidity.
T3  - CFS working paper series - 468 
KW  - liquidity externalities
KW  - order flow
KW  - trade signaling
KW  - limit order book
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/35088
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-350883
UR  - http://ssrn.com/abstract=2504549
IS  - September 18, 2014
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -