Fig. 1. This figure presents summary statistics for volume, bid–ask spread, and price errors over time. Volume is defined as the number of shares traded. Bid–ask spread is the difference between the best price in the book for buying a share and the best price in the book for selling a share. Absolute errors in trade price are defined as the difference between the quote midpoint and the true value of the security. The variables are computed separately for each 15-second interval in the trading period. Panel A: volume; Panel B: bid–ask spread; Panel C: pricing errors.

Fig. 2. This figure presents summary statistics on orders and trades for the different types of traders. The two informed traders know the true value of the security before trading begins. One small liquidity trader needs to sell five shares and another needs to buy five shares. One large liquidity trader needs to sell 20 shares and another needs to buy 20 shares. Each limit order submitted by a trader is for one share. Market orders are defined as the taking of limit orders at the best prices in the book. Expired limit orders are orders that are left in the book at the end of the trading period, while cancelled limit orders are those that traders actively remove from the book. Panel B plots the average number of shares executed by a trader who belongs to one of the three types. This variable is computed separately for each 15-second interval in the trading period. Panel A: market and limit orders; Panel B: shares executed by trader type.

Fig. 3. This figure presents the submission rates and taking rates for the different types of traders over time. The two informed traders know the true value of the security before trading begins. One small liquidity trader needs to sell five shares and another needs to buy five shares. One large liquidity trader needs to sell 20 shares and another needs to buy 20 shares. Submission rate is defined as the number of limit orders a trader submits divided by the sum of her limit and market orders. Taking rate is defined as the percentage of trades completed using market orders (the number of market orders a trader submits divided by the sum of her market orders and executed limit orders). The variables are computed separately for each 15-second interval in the trading period. Panel A: submission rate of limit orders; Panel B: taking rate or the percentage of trades completed using market orders.

Fig. 4. This figure presents the submission rates of the different types of traders conditional on depth in the book at the best bid or offer (BBO) on the same side as the order. The two informed traders know the true value of the security before trading begins. One small liquidity trader needs to sell five shares and another needs to buy five shares. One large liquidity trader needs to sell 20 shares and another needs to buy 20 shares. Panel A reports the submission rate of limit orders (the number of limit orders a trader submits divided by the sum of her limit and market orders) conditional on four BBO depth levels: (1) depth less than or equal to two shares, (2) depth greater than two shares and less than or equal to four shares, (3) depth greater than four shares and less than or equal to six shares, and (4) depth greater than six shares. Panel B reports the number of limit orders submitted at the BBO for each level divided by the total number of limit and market orders in that depth level. Panel A: all limit orders; Panel B: limit orders at the best bid or offer.

Fig. 5. This figure presents the submission rates of the different types of traders conditional on depth in the book at the best bid or offer (BBO) on the other side of the book (i.e., the ask side for a buy order). The two informed traders know the true value of the security before trading begins. One small liquidity trader needs to sell five shares and another needs to buy five shares. One large liquidity trader needs to sell 20 shares and another needs to buy 20 shares. Panel A reports the submission rate of limit orders (the number of limit orders a trader submits divided by the sum of her limit and market orders) conditional on four BBO depth levels: (1) depth less than or equal to two shares, (2) depth greater than two shares and less than or equal to four shares, (3) depth greater than four shares and less than or equal to six shares, and (4) depth greater than six shares. Panel B reports the number of limit orders submitted at the BBO for each level divided by the total number of limit and market orders in that depth level. Panel A: all limit orders; Panel B: limit orders at the best bid or offer.

Absolute deviation of security value from prior expected mean value of $25.00. Actual values of securities traded equaled 25 plus or minus the indicated number. The sign of the deviation from 25 varied across securities and across cohorts. Half of the cohorts traded securities in order 1, while the other half traded securities in order 2. Only the securities indicated in bold were used in the analysis; other securities were included only to allow security values to be distributed as indicated to traders. Low-volatility securities have deviations of 7 or less; high-volatility securities have deviations of 12 or more.

This table presents the submission rates, taking rates, and average trading profit per market for the different types of traders in each of the volatility/extremity cells. Submission rate is defined as the number of limit orders a trader submits divided by the sum of her limit and market orders. Taking rate is defined as the percentage of trades completed using market orders (the number of market orders a trader submits divided by the sum of her market orders and executed limit orders). Trading profit per market is defined as the sum, across all limit orders and market orders a trader submits, of the difference between the trading price and the true value of the security. The volatility factor of the security's true value has two levels: high (a uniform distribution) and low (a bell-shaped distribution). The extremity factor (how different the realized value of the security is from its unconditional mean) has two levels: high (realized values that are at least $12.00 from expected value) and low (realized values that are no more than $7.00 from expected value). The two informed traders know the true value of the security before trading begins. One small liquidity trader needs to sell five shares and another needs to buy five shares. One large liquidity trader needs to sell 20 shares and another needs to buy 20 shares. We first compute the variable under investigation for an individual trader and then the average for a trade type within each of the eight cohorts. The numbers in the table represent the averages across the cohorts.

This table presents the submission rates and taking rates for the different types of traders conditional on various states of the market or the traders’ targets. The numbers in the table represent the averages across the cohorts. Submission rate (SR) is defined as the number of limit orders a trader submits divided by the sum of her limit and market orders. Taking rate (TR) is defined as the percentage of trades completed using market orders (the number of market orders a trader submits divided by the sum of her market orders and executed limit orders). Panel A gives these rates conditional on the remaining value of the private information. The four levels are defined by the distance of the quote midpoint from the true value. Panel B gives these rates for the liquidity traders conditional on being before or after completion of their trading targets. Panel C gives these rates conditional on both the remaining aggregate target of all liquidity traders and the value of information.

This table provides an analysis of the trading losses of the liquidity traders. The actual losses incurred in the experiment are compared with losses generated by three hypothetical strategies. Strategy one assumes that the liquidity traders fulfill their trading targets by using market orders at a constant rate throughout the trading period (executing against the best prices in the book when the orders arrive to the market). Strategy two assumes the liquidity traders fulfill their trading targets using market orders at a constant rate during the first half of the trading period. Strategy three assumes that they fulfill their trading targets using market orders during the second half of the trading period. The numbers in the table represent the averages across the cohorts.

This table presents the submission rates for the different types of traders conditional on both the prevailing spread and the best bid or offer (BBO) depth in the book. The numbers in the table represent averages across the cohorts. Submission rate (SR) is defined as the number of limit orders a trader submits divided by the sum of her limit and market orders. Panel A provides the results conditional on BBO depth on the same side as the order (i.e., the ask side for a sell order). Panel B provides the results conditional on BBO depth on the other side of the book (i.e., the bid side for a sell order).