Orders versus Trades on the Consolidated Tape

All U.S. exchanges report trades based on non-marketable limit orders resting in the limit order book (LOB). Using ITCH data time stamped to the nanosecond, we show that this reporting convention typically results in arriving marketable orders (Orders) of a given size being reported as multiple trades of smaller size. We show that the size of Orders cannot be recovered using data sources time stamped to the millisecond such as the NYSE daily TAQ and the Consolidated Tape. Use of trades rather than Orders can substantially bias empirical applications such as estimates of the components of the spread.