Limit-order completion time in the London stock market
Abstract
This study develops an econometric model of limit-order completion time using
survival analysis. Time-to-completion for both buy and sell limit orders is estimated
using tick-by-tick UK order data. The study investigates the explanatory power of
variables that measure order characteristics and market conditions, such as the limitorder
price, limit-order size, best bid-offer spread, and market volatility. The generic
results show that limit-order completion time depends on some variables more than on
others. This study also provides an investigation of how the dynamics of the market are
incorporated into models of limit-order completion. The empirical results show that
time-varying variables capture the state of an order book in a better way than static
ones. Moreover, this study provides an examination of the prediction accuracy of the
proposed models. In addition, this study provides an investigation of the intra-day
pattern of order submission and time-of-day effects on limit-order completion time in
the UK market. It provides evidence showing that limit orders placed in the afternoon
period are expected to have the shortest completion times while orders placed in the
mid-day period are expected to have the longest completion times, and the sensitivities
of limit-order completion time to the explanatory variables vary over the trading day.