Working Orders in Limit Order Markets and Floor Exchanges

  • Published: Aug 14, 2007
  • Pages: 1589-1621
  • DOI: 10.1111/j.1540-6261.2007.01252.x


We analyze limit order markets and floor exchanges, assuming an informed trader and discretionary liquidity traders use market orders and can either submit block orders or work their demands as a series of small orders. By working their demands, large market order traders pool with small traders. We show that every equilibrium on a floor exchange must involve at least partial pooling. Moreover, there is always a fully pooling (worked order) equilibrium on a floor exchange that is equivalent to a block order equilibrium in a limit order market.

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