Order Placement Strategies in High-Frequency Markets

Abstract

I analyze order placement strategies by high-frequency traders (HFT) and non-HFT on Euronext Paris. Virtually all orders are limit orders submitted by fast traders, in most cases acting as market makers. Fast traders display high limit to market order ratios and their orders have lower ll rates, higher cancellation rates, and shorter lifetime than non-HFT orders. Liquidity taking orders are less costly for HFT than non-HFT whereas liquidity supplying orders are cheaper for non-HFT than HFT. As volatility rises, the ratio of limit order to market orders increases (decreases) for fast (slow) traders but fast traders become more conservative in their limit order submissions.