Trading and Ordering Patterns of Market Participants in High Frequency Trading Environment: Empirical Study in the Japanese Stock Market

Abstract

In this study, we investigate ordering patterns of different types of market participants in Tokyo Stock Exchange (TSE) by examining order records of the listed stocks. Firstly, we categorize the virtual servers in the trading system of TSE, each of which is linked to a single trading participant, by the ratio of cancellation and execution in the order placement as well as the number of executions at the opening of the afternoon session. Then, we analyze ordering patterns of the servers in the categories in short intervals for the top 10 highest trading volume stocks. By classifying the intervals into four cases by returns, we observe how different types of market participants submit or execute orders in the market situations. Moreover, we investigate the shares of the executed volumes for the different types of servers in the swings and roundabouts of the Nikkei 225 index, which were observed in September in 2015. The main findings of this study are as follows: Server type A, which supposedly includes non-market making proprietary traders with high-speed algorithmic strategies, executes and places orders along with the direction of the market. The shares of the execution and order volumes along with the market direction increase when the stock price moves sharply. Server type B, which presumably includes servers employing a market making strategy with high cancellation and low execution ratio, shifts its market making price ranges in the rapid price movements. We observe that passive servers in Server type B have a large share and buy at low levels in the price falls. Also, Server type B, as well as Server type A, makes profit in the price falling days and particularly, the aggressive servers in the server type make most of the profit. Server type C, which is assumed to include servers receiving orders from small investors, constantly has a large share of execution and order volume.

Appendices

Appendix A: Shares of Executed Orders in the Swings and Roundabouts, 4th and 8th September 2015

This section provides the tables and figures on the shares of executed on 4th and 8th September 2015 in the swings and roundabouts.

See Tables 56, 57, 58, 59, 60.

• Tables and figure of 4th September 2015—Down 2.84%

Table 56 Number of times for intervals with different levels of market returns and thinnesses

Table 57 Shares of selling orders with different levels of market returns and thinnesses

Table 58 Shares of buying orders with different levels of market returns and thinnesses

Table 59 Shares of price renewal selling orders with different levels of market returns and thinnesses

Table 60 Shares of price renewal buying orders with different levels of market returns and thinnesses

• Tables and figure of 8th September 2015—Down 2.87%

See Tables 61, 62, 63, 64, and 65 and Fig. 4.

Table 61 Number of times for intervals with different levels of market returns and thinnesses

Table 62 Shares of selling orders with different levels of market returns and thinnesses

Table 63 Shares of buying orders with different levels of market returns and thinnesses

Table 64 Shares of price renewal selling orders with different levels of market returns and thinnesses

Table 65 Shares of price renewal buying orders with different levels of market returns and thinnesses

Fig. 4

Executed volumes versus price changes, 8th September

Appendix B: P&L of Server Type B by Ticker, 1st September 2015

This section presents the P&L of Server type B by ticker on 1st September 2015, which corresponds to the analysis in Sect. 4.3.

See Table 66.

Table 66 1st September 2015 Daily return by ticker

• 6762 (Tables 67 and 68).

Table 67 1st September 2015 P&L, 6762

Table 68 1st September 2015 P&L, 6762

• 2802 (Tables 69 and 70).

Table 69 1st September 2015 P&L, 2802

Table 70 1st September 2015 P&L, 2802

• 7270 (Tables 71 and 72).

Table 71 1st September 2015 P&L, 7270

Table 72 1st September 2015 P&L, 7270

• 7267 (Tables 73 and 74).

Table 73 1st September 2015 P&L, 7267

Table 74 1st September 2015 P&L, 7267

• 8411 (Tables 75 and 76).

Table 75 1st September 2015 P&L, 8411

Table 76 1st September 2015 P&L, 8411

• 8306 (Tables 77 and 78).

Table 77 1st September 2015 P&L, 8306

Table 78 1st September 2015 P&L, 8306

• 9984 (Tables 79 and 80).

Table 79 1st September 2015 P&L, 9984

Table 80 1st September 2015 P&L, 9984

• 6758 (Tables 81 and 82).

Table 81 1st September 2015 P&L, 6758

Table 82 1st September 2015 P&L, 6758

• 8316 (Tables 83 and 84).

Table 83 1st September 2015 P&L, 8316

Table 84 1st September 2015 P&L, 8316

• 7203 (Tables 85 and 86).

Table 85 1st September 2015 P&L, 7203

Table 86 1st September 2015 P&L, 7203

Appendix C: P&L of Server Type A by Ticker, 1st September 2015

This section shows the P&L of Server type A by ticker on 1st September 2015, which corresponds to the analysis in Sect. 4.4.

See Tables 87, 88, 89, 90, 91, 92, 93, 94, 95 and 96.

Table 87 1st September 2015 P&L, 9984

Table 88 1st September 2015 P&L, 8411

Table 89 1st September 2015 P&L, 8316

Table 90 1st September 2015 P&L, 8306

Table 91 1st September 2015 P&L, 7270

Table 92 1st September 2015 P&L, 7267

Table 93 1st September 2015 P&L, 7203

Table 94 1st September 2015 P&L, 6762

Table 95 1st September 2015 P&L, 6758

Table 96 1st September 2015 P&L, 2802