Market Prices and Limit Order Dynamics: What's Going on in Today's Stock Markets?
Markets are bursting at their seams with financial data. Much of the data that researchers are now mining is called Level I, II, and III data; this data comprises information on orders, executions and cancellations across different price levels. Until recently, such data was scarce. Today, it is more accessible, but still little understood. The not-for-profit Big Data Finance 2015 conference taking place at NYU Courant on March 6, 2015, will present selected techniques and results of big data analytics applied to Finance.
This article briefly explores a data phenomenon. The relationship between returns and order placement and cancellations is examined and the following findings are discussed:
Limit orders and cancellations do not significantly move prices. Instead, changes in prices significantly affect new limit order placements and cancellations.
During the minute when prices go up (down), more limit buy (sell) orders are cancelled than placed
The minute after an up (down) move, more limit sell (buy) orders are cancelled than placed
No statistically-significant dynamics can be detected past these two minutes