Document de travail

Hidden Limit Orders and Liquidity in Order Driven Markets

Sophie Moinas


This paper analyzes the rationale for the submission of hidden limit orders, and compares opaque and transparent limit order books. In my sequential model, the limit order trader may be informed with some probability. Both informed and large uninformed liquidity suppliers submit hidden orders in order to decrease the informational impact of their large orders, while ensuring a large trading volume. As they cannot adopt such a strategy in the transparent market, I find that pre-trade opacity improves market liquidity, and the welfare of the participants. My model further yields empirical predictions on the use and revelation of hidden orders in opaque markets.

Codes JEL

  • G10: General
  • G14: Information and Market Efficiency • Event Studies • Insider Trading
  • G18: Government Policy and Regulation


Sophie Moinas, « Hidden Limit Orders and Liquidity in Order Driven Markets », TSE Working Paper, n° 10-147, mars 2010.

Voir aussi

Publié dans

TSE Working Paper, n° 10-147, mars 2010