The maths of limit order book behaviour

September 19, 2008

Lately I’ve been taking an interest in the maths of limit order book behaviour. Electronic exchanges, and many ECNs, are organised as limit order book trading systems. Stock exchanges, like the LSE, and futures exchanges, like Eurex, are organised as limit order books. Larry Harris has interesting comments to make on the interplay between limit and market orders on limit order books. It’s an interesting area for trading system developers, since broker dealer banks and hedge funds sometimes sponsor system development aimed at exploiting order book behaviour. Here’s some linkage…

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