What Is Order Flow Ixicity - 1504 Words

\section{Discussion} \label{sec:Dis} The aim of this paper is to contribute to the development of a framework for measuring order-flow toxicity and to take a position regarding the VPIN dispute. Initially, an assessment of the measure of Volume Synchronized Probability of Informed Trading, commonly known as VPIN, was performed. VPIN was evaluated during 3 events of high market stress levels, in high-frequency context. This evaluation was done to verify the reliability of VPIN as an indicator for order-flow toxicity.\\ \newline The main innovation of this dissertation was the evaluation of VPIN during stress events due to distinct nature and underlying causes, and its complemented with the comparison of the trading dynamics. Our results†¦show more content†¦In the Figure below it can be seen that after the levels dropped, they did not bounce back. The cumulated order imbalances curves can be interpreted as a signal of a less dynamic market (a decline in liquidity) after the stressful events. \\ Regarding the Knightmare data sample, Boyd Gaming Corporation (BYD) was picked out for its peculiar trading patterns. The cumulated order imbalances increased during the first 30 minutes of the day and kept high the rest of the day. Moreover, extremely high volatility is registered in the same period. From the mentioned previously, one can deduce that more selling orders arrived (for BYD) when the prices increased. It might be interesting to study the sensibility of the market depth with respect to the price changes. Also to create a benchmark for the order imbalances. Additionally, one can argue that that liquidity was not moved out from the LOB. Given that the order imbalances curve was stable the rest of the day, and sell orders were not cancelled.\\ \newline From the Hack Crash, the cumulated order imbalances curve of PowerShares QQQ Trust (QQQ) called our attention. As expected, the cumulated order imbalances dropped as a reaction to the false tweet. But they did not recover to its previous level; the growth trend did not recover as well. Moreover, a second drop was registered after 2 pm, after that, it gradually increased until the market closed. \\ \newline Easely