Publication Type
Journal Article
Version
publishedVersion
Publication Date
9-2025
Abstract
Limit orders submitted around the same time are subject to random latencies and will be queued accordingly. In equilibrium, end-of-queue limit orders always lose money—the liquidity supply appears excessive. The model generates empirical predictions regarding such “overshooting” liquidity: (i) new limit orders appear fleeting—clustered submissions are followed by immediate cancellations, (ii) the resulting cancel-to-add count ratio reflects adverse selection, and (iii) the cancel-to-add size ratio measures high-frequency market-making activity. Welfare can be hurt by the overshooting liquidity if it induces excessive speculation. Overall, the model contributes to a more comprehensive understanding and better utilization of order book data.
Keywords
limit order book, depth, latency, time priority, market fragmentation
Discipline
Finance and Financial Management
Research Areas
Finance
Areas of Excellence
Digital transformation
Publication
Management Science
First Page
1
Last Page
20
ISSN
0025-1909
Identifier
10.1287/mnsc.2023.03371
Publisher
Institute for Operations Research and Management Sciences
Citation
YUESHEN, Bart Zhou.
Queuing uncertainty of limit orders. (2025). Management Science. 1-20.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7748
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1287/mnsc.2023.03371