Order Submission Decisions and Market Performance Under Different Trading Mechanisms (Report‪)‬

ABSTRACT This study empirically investigates the relationship among trading arrangements, order submission decisions, and market performance. We analyze investors' placement decisions and their impact on market volatility as well as liquidity under different trading frequencies. Extending beyond the scope of microstructure theoretical papers, this study focuses on whether transaction uncertainty and asymmetric information affect traders' order placement strategies. The findings indicate that traders tend to place higher (lower) reservation buy (sell) prices to cope with transaction uncertainty under a less continuous-like market with more severe problem of asymmetric information. In particular, small traders place higher reservation prices in a less continuous market than in a more continuous-like market; this may help absorb incoming orders from the counterpart side, and thus, the market becomes more liquid and less volatile.