Motive and Opportunity: Order Choice in a Limit Order Book With Dispersed Information

ABSTRACT We test predictions of market microstructure theory relating to the determinants of order choice in a limit order book where information is dispersed among traders. Using an experimental limit order book, with a large state space, we find that informed traders exhibit patience, compatible with the ‘waiting game’ behaviour described in Foster and Viswanathan. In responding to expected profits, informed traders prefer limit orders that disguise their information as predicted by Roşu and Riccó et al.