Queuing Uncertainty of Limit Orders

• 成果类型: Article; Early Access
• 署名作者: Yueshen, Bart Zhou
• 署名单位: Singapore Management University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.03371
• 发表日期: 2025
• 关键词: limit order book; depth; Latency; time priority; market fragmentation

摘要

Limit orders submitted around the same time are subject to random latencies and will be queued accordingly. In equilibrium, end-of-queue limit orders always lose money-the liquidity supply appears excessive. The model generates empirical predictions regarding such overshooting liquidity: (i) new limit orders appear fleeting-clustered submissions are followed by immediate cancellations, (ii) the resulting cancel-to-add count ratio reflects adverse selection, and (iii) the cancel-to-add size ratio measures highfrequency market-making activity. Welfare can be hurt by the overshooting liquidity if it induces excessive speculation. Overall, the model contributes to a more comprehensive understanding and better utilization of order book data.