Competitive Quote Flipping and Trade Clusters

We model the decision to exhaust depth, which either flips the best quote to the opposite side or widens the spread. Such events often revert to the previous best quote. The model implies that quote flipping results in trade clusters at the competitive equilibrium. Using the S&P E-mini futures contract, we find on average three-quarters of quote changes revert and about one-third of these events are isolated over a 20-millisecond window. Trade clusters arise before a quote change, where 18.1% of all volume occurs near a reverting change in quotes. Empirically, this model explains up to 38% of quote changes

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Year of publication:	[2022]
Authors:	Fishe, Raymond P.H ; Roberts, John S.
Publisher:	[S.l.] : SSRN
Subject:	Regionales Cluster \| Regional cluster \| Internationaler Wettbewerb \| International competition \| Theorie \| Theory \| Wertpapierhandel \| Securities trading \| Clusteranalyse \| Cluster analysis

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