Study On Orders And Cancellation Of Limit Order Book

The microstructure of securities market is developing rapidly in the field of finance.At the same time,along with the development of electronic trading system,revealing the price behavior of financial assets from the perspective of limit order book,has important significance to perfect the market rules and transaction mechanism.China's stock market is the order driven market,investors in this market have the choice to submit limit orders or market orders.These orders follow the rules of "price first,time first" to make transactions.In this market Orders without timely transactions become a limit order book.Many scholars believe that these instructions contain a lot of deviation from the information of optimal price,and exploring its inherent characteristics and rules can help investors to forecast short-term price.Therefore,to establishment an appropriate model to describe the intrinsic characteristics of the limit order book is very necessary.In the study of limit order book,first of all,we study the bid-ask spread of Shanghai and Shenzhen stock markets in China.By constructing 20 seconds spread sequence of Shanghai and Shenzhen,we found that trading spread in orders is not balanced in one trading day.And through the analysis of the Lomb-Scargle cycle chart,we discovered the bid-ask spread of the two cities is presented "L" pattern and the bidask spread decreased fast in the 40 minutes after the opening of the stock market.Secondly,in the study discovery function of limit order book price,this paper used the Hasbrouck method to to estimate the contribution of three variables(the average price of the best bid,the price of the last transaction and the weighted average price of the second step to the fifth step)to the price discovery.Through the empirical analysis,we found that the average price of the best bid made largest contribution,reaching 60.11%,followed by the price of the last transaction of 20.95%,and the last is the weighted average price.Finally,We read a lot literature about the cancellation of the limit order book and developed a theoretical model in this aspect.It is a great pity that we can not do an empirical research because of the lack of data.