Exponential law of order placement in informal markets

Determine whether the observed exponential distributions of (i) the daily bid–ask spread and (ii) the relative distances of quoted prices from the best bid and best ask constitute a general law governing order placement mechanisms in informal currency markets, as suggested by the empirical Limit Order Book constructed for the Cuban informal USD/CUP market.

Background

In Section 3, the paper analyzes the informal Cuban USD/CUP market using a Limit Order Book reconstructed from scraped intentions to trade. The authors report that the distributions of the daily bid–ask spread and of the average relative distances to the best bid and best ask follow exponential forms.

They note that, although such exponential behavior is clearly observed empirically in this informal setting, it is not established whether this pattern reflects a more general law governing how agents place orders in informal markets. Confirming or refuting this would clarify whether the observed exponential regularities are market-specific artifacts or universal microstructural features of informal markets.