Market vs. Limit Orders: The SuperDOT Evidence on Order Submission Strategy

TLDR

The paper introduces performance measures for market and limit orders, proposing separate metrics for precommitted and passive traders. The authors compute these metrics using a sample of NYSE SuperDOT orders. Results show that limit orders placed at or better than the prevailing quote outperform market orders even after accounting for penalties and price improvement, and that commonly used limit‑order strategies by SuperDOT traders perform best, while conditional liquidity‑offering strategies are not profitable. No additional metadata provided.

Abstract

This paper discusses performance measures for market and limit orders. We suggest two measures: one for precommitted traders (who must trade) and another for passive traders (who are indifferent to trading). We compute these measures for a sample of NYSE Super? DOT orders. The results suggest that the limit order placement strategies most commonly used by NYSE SuperDOT traders do in fact perform best. Limit orders placed at or better than the prevailing quote perform better than do market orders, even after imputing a penalty for unexecuted orders, and after taking into account market order price improvement. Un? conditional order submission strategies that use SuperDOT to offer liquidity in competition with the specialist do not appear to be profitable.