Abstract
We provide detailed analysis of hidden order trading on U.S. exchanges. Hidden order trades and their volume comprise about 13% and 14% of the trades and volume on U.S. exchanges. Hidden liquidity is higher in stocks with lower market capitalization, lower turnover, and lower volatility. Stocks with higher spread, greater depth, and higher prices have a higher level of hidden liquidity. Stocks listed on NASDAQ have a higher level of hidden liquidity as well. Hidden liquidity is lower at the beginning of the week and increases on Wednesdays, Thursdays, and Fridays based on number of trades and the volume executed against hidden liquidity. The aggregate level of hidden liquidity is higher on days of low market volatility. The literature has shown that hidden liquidity increases around days of earnings announcements, but we find no evidence of increases in hidden liquidity around macroeconomic news announcements. These findings are useful in understanding the level and determinants of hidden liquidity on U.S. exchanges, which is not yet understood in detail.
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