Strategic Order Splitting, Order Choice and Aggressiveness: Evidence from the Taiwan Futures Exchange

We investigate the strategic order-splitting behavior and order aggressiveness of different types of traders using a unique dataset on the Taiwan Futures Exchange. By examining the trades and orders for each and every account, we find that, as compared to domestic institutional traders and individual traders, foreign institutional traders and futures proprietary firms are more likely to split their orders. Foreign institutional traders and futures proprietary firms seem to be better informed, with their orders apparently being split so as to reveal their information on a gradual basis. Furthermore, we find that foreign institutional traders and futures proprietary firms use fewer market orders, choosing instead to submit aggressive limit orders, possibly due to their desire to make the most of their information advantage.