Odd Lot Order Aggressiveness and Stealth Trading

Abstract

This study investigates the degree to which orders are aggressively priced, paying particular attention to odd lot orders, and examines whether odd lot orders are being successfully used in stealth trading strategies. We find that odd lot orders execute at higher frequencies, which is due to odd lot orders being disproportionally aggressively priced. We find that microstructure changes have not altered the nature of price aggressiveness, but its determinants hold different explanatory power for odd lot orders. We find strong evidence that informed traders are shredding their orders into odd lot orders and stealth trading is permeating odd lot denominations.

Keywords: Odd lot orders, aggressive orders, stealth trading

JEL Classification: G10, G14