Rob Daly is a financial tech journalist who produces the rather excellent Daly Post Podcast. In this most recent edition he asks:read more...
Two forces have reshaped global securities markets: Exchanges operate at much faster speeds and the trading landscape has become more fragmented. In order to analyze the implications of these evolutions, we study a framework that captures (i) exchanges’ incentives to invest in faster platforms and (ii) investors’ trading and participation decisions. We find that speed competition reduces asset prices. Regulations that protect investors (e.g. SEC's trade-through) reduce prices further and lead to more fragmentation and faster speeds. Endogenizing speeds can also change the slope of asset demand curves. On normative side, for a given number of exchanges, speed investments are generally socially desirable. Competition among exchanges increases participation and welfare for a given trading speed, but is not necessarily desirable when speeds are endogenous. Our model sheds light on the experience of European and U.S. markets since the implementation of MiFID and Reg. NMS, and provides guidance for optimal regulations.
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or limit orders, which are represented respectively by impulse controls and continuous controls. We model and discuss the consequences of the two main features of this particular microstructure: first, the limit orders sent by the high frequency trader are only partially executed, and therefore she has no control on the executed quantity. For this purpose, we model cumulative executed volumes by compound Poisson processes. Second, the high frequency trader faces the overtrading risk, which is the risk of brutal variations in her inventory. The consequences of this risk are investigated in the context of optimal liquidation.
We propose and study a stylization of high frequency trading (HFT). Our interest is an order book which consists of orders from slow liquidity traders and orders from high-frequency traders. We would like to frame a model which is amenable to the (seemingly natural) mathematical toolkit of separation of scales and which can be used to address some of the larger issues involved in HFT.
Transaction Expands Equinix Presence in China to Support Demand for Global Expansion into High-Growth Economyread more...
Peter Nabicht, Chief Technology Officer at Allston Trading, talks about the many definitions of high frequency trading and when/why/how it should or should not be regulated.read more...
moneyscience: Via @LetsTalkFX_ Is this the toughest job in finance? Goldman Sachs seeks social media strategist http:/
fin_tech: Financial Technology News Report is out! http:/