Fleeting Orders and Dynamic Trading Strategies: Evidence from the Australian Security Stock Exchange (ASX)

Authors

Tina Prodromou, University of WollongongFollow
Joakim Westerholm, University of Sydney
Hui Zheng, Macquarie University, University of Sydney
Dionigi Gerace, University of WollongongFollow

RIS ID

133041

Publication Details

Viljoen, T., Westerholm, J., Zheng, H. & Gerace, D. (2015). Fleeting Orders and Dynamic Trading Strategies: Evidence from the Australian Security Stock Exchange (ASX). Journal of Accounting and Finance, 15 (4), 108-134.

Abstract

This study examines the behaviour of fleeting orders before and after two structural changes at the Australian Securities Exchange (ASX); the removal of broker IDs from the public limit order book and a change in the price structure of exchange fees. Following Hasbrouck and Saar (2009), fleeting orders are defined as orders that are revised or cancelled within two seconds. Firstly, this study confirms that fleeting limit order revisions exhibit similar properties to liquidity-demanding orders. Secondly, after the removal of broker IDs on the market, traders start to aggressively chase the market price. Thirdly, after the price structure changes, traders start to use fleeting orders to search for latent liquidity and more often switch from limit orders to market orders when the cost of immediate execution in the market decreases. This study is important to understand order dynamics in the current high frequency trading environment.