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. …

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 …