What pieces of limit order book information are informative ?

This paper studies the importance of different pieces of limit order book information in characterizing order aggressiveness and the timing of trades, order submissions and cancellations. Using limit order book information on a representative sample of Spanish stocks, we evidence that most of the explanatory power of the book concentrates on the best quotes. However, the book beyond the best quotes also matters in explaining the aggressiveness of traders. In particular, liquidity providers (limit-order traders) benefit more from an increased degree of pre-trade transparency than liquidity consumers (market-order traders). Finally, no piece of book information matters in explaining the timing of orders.