Abstract
In this study, we investigate ordering patterns of different types of market participants in Tokyo Stock Exchange (TSE) by examining order records of the listed stocks. Firstly, we categorize the virtual servers in the trading system of TSE, each of which is linked to a single trading participant, by the ratio of cancellation and execution in the order placement as well as the number of executions at the opening of the afternoon session. Then, we analyze ordering patterns of the servers in the categories in short intervals for the top 10 highest trading volume stocks. By classifying the intervals into four cases by returns, we observe how different types of market participants submit or execute orders in the market situations. Moreover, we investigate the shares of the executed volumes for the different types of servers in the swings and roundabouts of the Nikkei 225 index, which were observed in September in 2015. The main findings of this study are as follows: Server type A, which supposedly includes non-market making proprietary traders with high-speed algorithmic strategies, executes and places orders along with the direction of the market. The shares of the execution and order volumes along with the market direction increase when the stock price moves sharply. Server type B, which presumably includes servers employing a market making strategy with high cancellation and low execution ratio, shifts its market making price ranges in the rapid price movements. We observe that passive servers in Server type B have a large share and buy at low levels in the price falls. Also, Server type B, as well as Server type A, makes profit in the price falling days and particularly, the aggressive servers in the server type make most of the profit. Server type C, which is assumed to include servers receiving orders from small investors, constantly has a large share of execution and order volume.
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We would like to express our gratitude to JPX for supplying the order data in TSE.
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All the contents expressed in this research are solely those of the authors and do not represent any views or opinions of any institutions. In particular, they are not an official view of the Financial Services Agency or FSA Institute. The authors are not responsible or liable in any manner for any losses and/or damages caused by the use of any contents in this research.
Appendices
Appendix A: Shares of Executed Orders in the Swings and Roundabouts, 4th and 8th September 2015
This section provides the tables and figures on the shares of executed on 4th and 8th September 2015 in the swings and roundabouts.
See Tables 56, 57, 58, 59, 60.
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Tables and figure of 4th September 2015—Down 2.84%
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Tables and figure of 8th September 2015—Down 2.87%
See Tables 61, 62, 63, 64, and 65 and Fig. 4.
Appendix B: P&L of Server Type B by Ticker, 1st September 2015
This section presents the P&L of Server type B by ticker on 1st September 2015, which corresponds to the analysis in Sect. 4.3.
See Table 66.
Appendix C: P&L of Server Type A by Ticker, 1st September 2015
This section shows the P&L of Server type A by ticker on 1st September 2015, which corresponds to the analysis in Sect. 4.4.
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Saito, T., Adachi, T., Nakatsuma, T. et al. Trading and Ordering Patterns of Market Participants in High Frequency Trading Environment: Empirical Study in the Japanese Stock Market. Asia-Pac Financ Markets 25, 179–220 (2018). https://doi.org/10.1007/s10690-018-9245-6
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DOI: https://doi.org/10.1007/s10690-018-9245-6