Limit order book transparency and order aggressiveness at the closing call: Lessons from the TWSE 2012 new information disclosure mechanism

• We study the determinants of order aggressiveness in the closing call auction.
• We estimate a sequential ordered probit model of order aggressiveness.
• Order aggressiveness increases as market transparency increases.
• The effect of spread and volatility is found even in the opaque market.
• The effect of spread on individual investors is reinforced by disclosed quotes.

Based on the recent TWSE limit order book (LOB) information disclosure mechanism, this paper contributes to the studies on the determinants of order aggressiveness in the closing call. First, on the less well-studied effect of market transparency, we find that, in entering new orders, both individual and institutional investors become more aggressive after the market becomes partially transparent. Second, even though order book information is not available during the opaque period, the effect of the spread on order aggressiveness is still significant, which is evidence of the existence of the expectation effect. Third, the launch of the new mechanism has further reinforced the effect of the spread for individual investors; it, therefore, may answer to the need of individual investors more than it may do for institutional investors.