Order Protection Through Delayed Messaging

• 成果类型: Article
• 署名作者: Aldrich, Eric M.; Friedman, Daniel
• 署名单位: Amazon.com; University of Essex; University of California System; University of California Santa Cruz
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4370
• 发表日期: 2023
• 页码: 774-790
• 关键词: High-frequency trading; continuous double auction; pegged orders; IEX

摘要

Several financial exchanges (e.g., IEX and NYSE American) recently introduced messaging delays to protect ordinary investors from high-frequency traders who exploit stale orders. To capture the impact of such delays, we propose a simple parametric model of the continuous double auction market format. The model examines the dynamics of midpoint pegged order queues and finds their steady states. It shows how messaging delays can protect pegged orders and improve investor welfare, but typically increase queuing costs. Recently available field data show that the empirical distribution of queued pegged orders is highly leptokurtotic and resembles the discrete Laplace distribution predicted by the model.