Abstract
The hidden order is currently increasingly popular as a standard feature of electronic limit order book markets. The invisible order allows traders to hide all, or partially hide their orders to avoid exposure to risk. I propose a new hidden order detection algorithm for the limit order book to investigate the impact of invisible orders on the market environment using E-mini S&P 500 data. The algorithm shows 43% all of the trade volume is involved with invisible liquidity. This work also finds that price impact decreases and market quality is improved with the presence of a hidden order both during high and low-frequency trading periods. I use this measure to study the association between hidden order and other observed market environments. The analysis finds aggressively hidden order activity when trading volume is increased.
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