Lead-Lag and Evasiveness of Price Limits Across Venues Based on Synchronised Orderbook Observations

In this paper, we show that synchronised market data across different venues can be of great help to better understand orderbook dynamics. We introduce a new measure for main European trading destinations: the “limit evasiveness”. It characterises the propensity of a limit to be cancelled without being emptied to prevent participants from consuming the liquidity displayed on the first limit. We show that Primary limits are less evasive than Cboe-ChiX.

Lastly, we highlight the “leading venues”, by observing which the most frequent venues are when a trade is done at a better price compared to all the previous orderbooks’ best limits observed before this new trade. We show that Cboe-ChiX is overrepresented in leading instances, thus providing better effective prices to participants.

It thus seems that MTFs are faster to cancel as well as to create new limits than primary markets.

All these analyses are conducted based on c. 580,000 Smart Order Router market data observations from May 2019 that register best limits across different venues existing at a given point in time.