Aggressive and Passive Trading by HFT and Non-HFT Participants
Summary
The document considers how trading activity is divided between liquidity taking and liquidity providing, and whether this differs by participant type. It cites a study of 36 liquid French stocks observed from November 2015 through July 2016. A table classifies trades by whether the aggressive and passive sides are high-frequency traders (HFTs) or non-HFTs: HFTs trade against HFTs in 33.6% of the reported activity, non-HFTs take liquidity from HFTs in 22.4%, HFTs take liquidity from non-HFTs in 31.2%, and non-HFTs trade against non-HFTs in 12.8%.
The cited research also describes HFTs as heterogeneous: some primarily remove liquidity while others provide it. The answer connects liquidity consumption with provision because aggressive trades execute against resting orders, and order books may replenish afterward. Replenishment is not guaranteed; it reports that roughly 10% of cases involve a lasting price move after liquidity is consumed, potentially reflecting information behind the trades. These findings offer a partial, market-specific answer rather than a universal breakdown by account size or across futures, equities, and crypto.
Key ideas
- Aggressive trades execute against resting liquidity, linking liquidity taking to liquidity provision.
- The cited French stock study reports activity shares for HFT and non-HFT participant pairings.
- HFT participants are not uniform; some tend to take liquidity while others supply it.
- Order-book replenishment can follow liquidity consumption, but some consumption coincides with lasting price moves.
- The evidence comes from a particular stock sample and does not establish proportions across other markets.
Tags
Full text
# What is the proportion of aggressive orders vs passive orders executed by different types of traders? # What is the proportion of aggressive orders vs passive orders executed by different types of traders? It's clear that each aggressive order (or market order or limit crossing BBO) is matched against the same volume of resting limit order(s). I'm interested in statistics per different types of traders, large or small. My hypothesis is that large traders such as market makers or execution algos execute more than 50% of their volume as resting orders, probably around 70-80%, but I could not find relevant studies. Will appreciate references to such studies. Alternatively, it can be statistics per account size of traders or anything relevant. I'm most interested in futures markets such as CME and Eurex, US stocks markets, and cryptocurrencies. My main motivation to to ask this question is to evaluate the 'importance' of market depth (order book) data compared to trades data (or times and sales). It seems that trades data is just 3-10% of all market data updates, but it's not a reliable way to answer my (probably vague) question because resting orders can be cancelled or moved at any time. ## Answer by lehalle (score 1) https://quant.stackexchange.com/a/77785 There is a partial answer to this question in Megarbane, Nicolas, Pamela Saliba, C-A L., and Mathieu Rosenbaum. "The behavior of high-frequency traders under different market stress scenarios" Market Microstructure and Liquidity 3, no. 03n04 (2017). In the paper, the dataset is made of the 36 most liquid French stocks, from November 2015 to July 2016. Let me focus on Table 2, that makes the difference between HFT and non-HFT market participants: | Aggressive | Passive | pct | | HFT | HFT | 33.6% | | non-HFT | HFT | 22.4% | | HFT | non-HFT | 31.2% | | non-HFT | non-HFT | 12.8 % | Another table in the paper shows HFT are polarized: they are not all of them operating the same way, some are mainly removing liquidity and overs providing liquidity. Another partial answer is that there is a correspondence between liquidity consumption and liquidity provision. Simply because one can only consume the liquidity that is there, and also because liquidity often replenishes the orderbooks. Of course it is not replenished systematically since in around 10% of the case, the price move consecutive to liquidity consumption is permanent, probably because there was information driving the trades.
Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.