"Quasi-Centralized Limit Order Books"

One of my papers got assigned its final journal coordinates today. (It came out a few months ago in advanced access.) Here are the details.

Title: Quasi-Centralized Limit Order Books

Authors: Martin D. Gould, Mason A. Porter, and Sam D. Howison

Abstract: A quasi-centralized limit order book (QCLOB) is a limit order book (LOB) in which financial institutions can only access the trading opportunities offered by counterpartieswithwhomthey possess sufficient bilateral credit. In this paper, we perform an empirical analysis of a recent, high-quality data set from a large electronic trading platform that utilizes QCLOBs to facilitate trade. We argue that the quote-relative framework often used to study other LOBs is not a sensible reference frame for QCLOBs, so we instead introduce an alternative, trade-relative framework, which we use to study the statistical properties of order flow and LOB state in our data. We also uncover an empirical universality: although the distributions that describe order flow and LOB state vary considerably across days, a simple, linear rescaling causes them to collapse onto a single curve. Motivated by this finding, we propose a semi-parametric model of order flow and LOB state for a single trading day. Our model provides similar performance to that of parametric curve-fitting techniques but is simpler to compute and faster to implement.