Abstract
We examine the effects of an order cancellation fee on limit order flow and execution quality in the PHLX options market. The cancellation fee on professional order flow is effective in reducing the rate at which limit orders are canceled. While the cancellation fee discourages the submission of non-marketable orders, it encourages the submission of marketable orders. Consequently, non-marketable order fill rates increase, marketable order fill speeds decrease, and bid-ask spreads widen. We also find slight increases in both dollar volume and market share. We explore whether a change in pick-off risk is a potential explanation for these new findings and policy implications.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
