On Linearity Of Transaction Costs In Order Driven Market

We research the properties of implicit transaction costs function for general-shaped limit order book. Equivalent conditions for linearity of the function are presented in terms of market liquidity. We also present a suitable functional form of implicit costs for order-driven market on the Moscow Interbank Currency Exchange (MICEX), based on high-frequency trading data. The proposed form meets the definition of costs and implied properties while corresponding to the real form of order distribution.