We develop a model of an order-driven exchange competing for order flow with off-exchange trading mechanisms. Liquidity … additional trade demand. We show, in equilibrium, hiding trade intentions can induce mis-coordination between liquidity supply … in prices and order flow after periods of high excess-supply of hidden liquidity. …

Based on a structural model we analyze adverse selection costs and liquidity supply in a pure open limit order book … capitalized stocks, and find empirical support for one of the main hypothesis put forth by the theory of limit order book markets …, which states that liquidity supply and adverse selection costs are inversely related. We also show that adverse selection …

complexities, e.g., fragmentation due to multiple venues, dynamics of limit order books, lit vs. dark liquidity, different trading …

We study liquidity provision by competitive high-frequency trading firms (HFTs) in a dynamic trading model with private … information. Liquidity providers face adverse selection risk from trading with privately informed investors and from trading with … liquidity providers to charge markups and earn profits - even under risk neutrality and perfect competition. A slight variation …

Speeding up the exchange does not necessarily improve liquidity. The price quotes of high-frequency market makers are … more likely to meet speculative high-frequency "bandits", thus less likely to meet liquidity traders. The bid-ask spread is …

liquidity provision during periods of high volatility; their liquidity provision is less affected by order imbalance shocks than …The effectiveness of liquidity provision by HFT firms via the limit order book is an unexplored but central policy …

has generally increased over time, and that in times of crisis liquidity is lower and the volatility of liquidity is …This paper presents the most extensive analysis of liquidity in the German equity market so far. We examine the … evolution of liquidity over time, the determinants of liquidity, and commonality across liquidity measures and countries. We …