medium · Market Microstructure
An institutional trader is worried about 'Signaling Risk.' Why might they choose to limit their POV to 5% instead of 20% even if the 20% rate is within their risk tolerance for impact?
- Lower rates reduce the commission paid to the broker
- Higher participation rates make the order easier for HFT sniffers to detect
- A 5% rate guaranteed execution at the NBBO midpoint
- The 5% rate avoids the 'Tick Size' constraint
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