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The effects of market depth on the arrival rate of orders

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Abstract

This paper presents a model to describe the dynamic trading process in limit order book. By studying the dynamic pattern of execution probabilities of limit orders with both time and the depth of limit order book, the authors conclude with the following properties: Arrival rates of market buy orders increase as the depth of buy queue in the book increases and decrease as the depth of sell queue increases, and vice versa; similar regularities for the arrival rate of market sell orders; both the arrival rate of market buy order and market sell orders increase as the depth of both sides in the book increases by the same amount. Furthermore, the authors describe more detailed temporary and permanent effects of the market depth on the arrival rates of orders.

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Authors and Affiliations

  1. School of Economics and Management, Beijing University of Chemical Technology, Beijing, 100029, China

    Qiang Zhang

  2. School of Economics and Management, Beihang University, Beijing, 100191, China

    Shancun Liu & Wanhua Qiu

Authors
  1. Qiang Zhang
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  2. Shancun Liu
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  3. Wanhua Qiu
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Corresponding author

Correspondence to Qiang Zhang.

Additional information

This research is supported by the National Natural Science Foundation of China under Grant Nos. 71371024, 71371023 and Fundamental Research Funds for the Central Universities under Grant No. ZZ1319.

This paper was recommended for publication by Editor WANG Shouyang.

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Zhang, Q., Liu, S. & Qiu, W. The effects of market depth on the arrival rate of orders. J Syst Sci Complex 27, 1192–1203 (2014). https://doi.org/10.1007/s11424-014-1247-5

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  • DOI: https://doi.org/10.1007/s11424-014-1247-5

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