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Determining The Intensity Of Buy And Sell Limit Order Submissions: A Look At The Market Preopening Period

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Executive Summary

Using a unique dataset the authors examine the behavior of market participants in the absence of trading. Specifically the authors investigate the duration between arrival of orders of the same type during the market preopening period. The authors find that the number of buy order submissions per unit of time is more significantly impacted by information inferred from the characteristics of incoming orders and changes that impact the current limit order book in comparison to the impact on sell order submissions. In addition, the authors find that traders on the buy side of the market tend to act on liquidity provided by the sell side and the sell side of the markets tends to increase their submissions when volume is removed from the sell side of the limit order book.

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