– The paper aims to investigate order-based manipulation that consists of order-placing strategies.
– Using the bid and ask record provided by Hong Kong Exchanges and Clearing Limited, a Level II dataset, the paper develops a methodology to obtain cancelled orders during regular trading hours. The paper examines the cancelled orders and potential order-based manipulation activities, as well as the corresponding behavior of different groups of stocks.
– Empirical results show that the relationship between order cancellation and order-based manipulation is strong and deserves more attention.
– The methodology can also be used by regulators and authorities to monitor suspicious activities in the market. This paper also suggests that analysis on high-frequency data does improve the understanding of trading activities in the stock market.
