Let's say we have a look at the NASDAQ's limit order book. We do have a bid side and ask side levels.

  1. Does the limit order book get wiped over night? Meaning everything which is not executed is removed by the end of the trading day?
  2. Or does it work differently and the limit order book status gets propagated from one trading day to another?
  3. If we have a look at a trading day and plot executed orders with 5 minutes aggregates, we can see a large increase at the end of each trading day. Is this because intra-day traders are trying to close all of the held positions?

Orders stay in order book for as long as you specify, e.g. "good till cancelled" (GTC) will be sitting there until it's executed or you cancel it.

There are many types, just google them - IOC, FOK, GTD, at open, at close etc.

Many brokers have introduced their own, proprietary types, see e.g. Interactive Broker's list here: https://ibkr.info/video/1037

The "large increase at the end of each trading day. " may be caused by different participants - day trading, people with 'at close' orders, speculators etc.

  • $\begingroup$ Hey, thanks for the answer. So the answer to the question: "Does the limit order book get wiped over night?" could be phrased as follows: Some orders might get erased by e.g. brokers, however there are still some orders (e.g. GTC), which stay valid for ever (meaning, there might a GTC order in the limit order book of some equity still today, which was filed 10 years ago). Is it a correct statement? Thanks $\endgroup$ – TechCrap Feb 16 '18 at 13:20
  • $\begingroup$ "Some orders might get erased by e.g. brokers" - broker on its own will not delete order unless instructed by the one who entered the order. "... filed 10 years ago" - "filling an order" means executing it, and once executed the order is removed from the order book; "submitting" order is better verb to use. $\endgroup$ – rbm Feb 16 '18 at 14:19

If you are processing ITCH messages, for instance, each day is separate, and starts with an empty book. If there are such things as GTC orders anymore, the ITCH feed would resend their Add messages first thing in the morning, so book building code can start state-free.

The end of day volume spike is addressed in literature, but it's caused by settlement processes, hedging, ETP rebalancing, the run-up to the closing auction, algorithmic smart order routers catching up to the end of their orders... lots of things. And also a little bit intraday traders trying to go flat, but honestly I'd think that was a minority of the volume.


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