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Strategic Market Choice: Frequent Call Markets vs. Continuous Double Auctions for Fast and Slow Traders

Elaine Wah, Dylan Hurd, Michael Wellman
2015 Proceedings of the The Third Conference on Auctions, Market Mechanisms and Their Applications  
This is ultimately a question of market choice, thus we model it as a game of strategic market selection, where agents choose to participate in either a frequent call market or a continuous double auction  ...  We also find strong evidence of a predator-prey relation between fast and slow traders: the fast traders chase agents into either market, and slow traders under pursuit seek the protection of the frequent  ...  Acknowledgments We are grateful to Jacob Abernethy, Michael Barr, and Uday Rajan for helpful feedback, and to the anonymous reviewers for their suggestions.  ... 
doi:10.4108/eai.8-8-2015.2260356 dblp:journals/sg/WahHW16 fatcat:f6dstbtnvrfzjgsiapcpgepp64

The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response

Eric B. Budish, Peter Cramton, John J. Shim
2013 Social Science Research Network  
Instead of the continuous limit order book (CLOB) that is currently predominant, we argue that financial exchanges should use frequent batch auctions: uniform price double auctions conducted, e.g., every  ...  Consequently, frequent batch auctions eliminate the mechanical arbitrage rents, enhance liquidity for investors, and stop the high-frequency trading arms race.  ...  We call this market design frequent batch auctions. Our argument against continuous limit order books and in favor of frequent batch auctions has three parts.  ... 
doi:10.2139/ssrn.2388265 fatcat:a3azmlwak5evfeulawpx3kmhfi

Designing an electronic auction market for complex 'smart parts' logistics: Options based on LeBaron's computational stock market

Bill McKelvey, Christine Wycisk, Michael Hülsmann
2009 International Journal of Production Economics  
They also may be conceived as electronic auction markets as 'smart parts' bid for the best routing and pricing from transportation firms.  ...  To ensure the world-wide functionality and efficiency of CALS transportation markets, we suggest the utility of an agent-based computational market design based on Blake LeBaron's stock-market model.  ...  preferences (e.g., fast/expensive vs. slow/cheap); for illustrative purposes, we select a part preferring a slow/cheap routing. 2.  ... 
doi:10.1016/j.ijpe.2009.03.006 fatcat:5jp7cgjwovedbe6rtj3biy3soi

Implementing High Frequency Trading Regulation: A Critical Analysis of Current Reforms

Michael Morelli
2017 Michigan Business & Entrepreneurial Law Review  
By analyzing more data on how high frequency traders interact with markets, regulators can assess the viability and scope of other potentially worthwhile measures targeting more general market threats.  ...  Likewise, regulators can determine who is in the best position to bear supervisory responsibility for particular trading activities: agencies, exchanges, traders, or some combination thereof.  ...  See generally Elaine Wah, Dylan Hurd & Michael Wellman, Strategic Market Choice: Frequent Call Markets vs.  ... 
doi:10.36639/mbelr.6.2.implementing fatcat:iya3fnkclzcmjmmdf6kvicspca

ZIP60: Further Explorations in the Evolutionary Design of Trader Agents and Online Auction-Market Mechanisms

Dave Cliff
2009 IEEE Transactions on Evolutionary Computation  
The "ZIP" adaptive automated trading algorithm has been demonstrated to outperform human traders in experimental studies of continuous double auction (CDA) markets populated by mixtures of human and "software  ...  Previous papers have shown that values of the eight parameters governing behavior of ZIP traders can be automatically optimized using a genetic algorithm (GA), and that markets populated by GA-optimized  ...  Thanks to my fellow FX Complex Risk quants and traders on the DB London FX trading floor for similarly valuable conversations and support, over several happy (but so very hectic) months, especially to  ... 
doi:10.1109/tevc.2008.907594 fatcat:ybrqc5caifh57knxaerrhu26oe

ZIP60: Further Explorations in the Evolutionary Design of Trader Agents and Online Auction-Market Mechanisms

Dave Cliff
2009 IEEE Transactions on Evolutionary Computation  
The "ZIP" adaptive automated trading algorithm has been demonstrated to outperform human traders in experimental studies of continuous double auction (CDA) markets populated by mixtures of human and "software  ...  Previous papers have shown that values of the eight parameters governing behavior of ZIP traders can be automatically optimized using a genetic algorithm (GA), and that markets populated by GA-optimized  ...  Thanks to my fellow FX Complex Risk quants and traders on the DB London FX trading floor for similarly valuable conversations and support, over several happy (but so very hectic) months, especially to  ... 
doi:10.1109/tevc.2007.907594 fatcat:icxs2m4od5aklmn7lm6knyff4m

Market Microstructure: A Survey

Ananth Madhavan
2000 Social Science Research Network  
JEL Classification: G10, G34 * I thank Avanidhar Subrahmanyam (editor), Rich Lyons and participants at the Market Microstructure Ph.D. seminar at Erasmus University for their comments.  ...  I discuss the implications of recent research for academics, investors, policy makers, and regulators.  ...  in a continuous double-auction.  ... 
doi:10.2139/ssrn.218180 fatcat:gc5ccwna2fbx5mjkls4ehc7i2u

Market microstructure: A survey

Ananth Madhavan
2000 Journal of financial markets  
JEL Classification: G10, G34 * I thank Avanidhar Subrahmanyam (editor), Rich Lyons and participants at the Market Microstructure Ph.D. seminar at Erasmus University for their comments.  ...  I discuss the implications of recent research for academics, investors, policy makers, and regulators.  ...  in a continuous double-auction.  ... 
doi:10.1016/s1386-4181(00)00007-0 fatcat:qy5wuov67nh4vgpiuskpunmzau

Software agents and the route to the information economy

J. O. Kephart
2002 Proceedings of the National Academy of Sciences of the United States of America  
The agents' superior performance suggests they will be used on a broad scale, which in turn suggests that interactions among agents will become frequent and significant.  ...  In private laboratories and in the Internet laboratory, researchers and developers are creating a variety of autonomous economically motivated software agents endowed with algorithms for maximizing profit  ...  In a continuously clearing market like the CDA, bid timing is very important, and it can be tricky. We introduced ''fast'' and ''slow'' variants of both ZIP and GD.  ... 
doi:10.1073/pnas.082080499 pmid:12011399 pmcid:PMC128587 fatcat:4gonymah3jgrdokvwklxhj5f5e

Technology and liquidity provision: The blurring of traditional definitions

Joel Hasbrouck, Gideon Saar
2009 Journal of financial markets  
Our principal finding is that fleeting limit orders are closer substitutes for market orders than for traditional limit orders.  ...  We hypothesize that a "new equilibrium" has arisen, driven by improved technology, the emergence of an active trading culture, and increased market fragmentation.  ...  These models come closer to the true interaction in double auctions organized as limit order markets where each trader chooses between demanding and supplying liquidity.  ... 
doi:10.1016/j.finmar.2008.06.002 fatcat:tsanihg4lzhtvk7omra75x7yv4

Technology and Liquidity Provision: The Blurring of Traditional Definitions

Joel Hasbrouck, Gideon Saar
2007 Social Science Research Network  
Our principal finding is that fleeting limit orders are closer substitutes for market orders than for traditional limit orders.  ...  We hypothesize that a "new equilibrium" has arisen, driven by improved technology, the emergence of an active trading culture, and increased market fragmentation.  ...  These models come closer to the true interaction in double auctions organized as limit order markets where each trader chooses between demanding and supplying liquidity.  ... 
doi:10.2139/ssrn.994369 fatcat:lpuuw7hxind6rhnmyjex4vpgzu

How Markets Slowly Digest Changes in Supply and Demand [chapter]

Jean-Philippe Bouchaud, J. Doyne Farmer, Fabrizio Lillo
2009 Handbook of Financial Markets: Dynamics and Evolution  
For strategic reasons large orders to buy or sell are only traded incrementally, over periods of time that can be as long as months.  ...  Liquidity dynamics plays a key role in determining volatility and in allowing the market to absorb large swings in supply and demand while remaining efficient.  ...  operation of the continuous double auction.  ... 
doi:10.1016/b978-012374258-2.50006-3 fatcat:4ohh4we26bbelfgwxo3qquwjf4

How Markets Slowly Digest Changes in Supply and Demand

Jean-Philippe Bouchaud, J. Doyne Farmer, Fabrizio Lillo
2008 Social Science Research Network  
For strategic reasons large orders to buy or sell are only traded incrementally, over periods of time that can be as long as months.  ...  Liquidity dynamics plays a key role in determining volatility and in allowing the market to absorb large swings in supply and demand while remaining efficient.  ...  operation of the continuous double auction.  ... 
doi:10.2139/ssrn.1266681 fatcat:b6prmw3wdrhd7cmqwqu4gad3gu

How markets slowly digest changes in supply and demand [article]

Jean-Philippe Bouchaud, J. Doyne Farmer, Fabrizio Lillo
2008 arXiv   pre-print
The ideas reviewed here are relevant to market microstructure regulation, agent-based models, cost-optimal execution strategies, and understanding market ecologies.  ...  We review a body of theory that makes detailed quantitative predictions about the volume and time dependence of market impact, the bid-ask spread, order book dynamics, and volatility.  ...  operation of the continuous double auction.  ... 
arXiv:0809.0822v1 fatcat:neczmoijfzcpraykklodvdp5ma

Limit Order Books

Martin David Gould, Mason Alexander Porter, Stacy Williams, Mark McDonald, Daniel Fenn, Sam Howison
2012 Social Science Research Network  
Limit order books (LOBs) match buyers and sellers in more than half of the world's financial markets.  ...  This survey highlights the insights that have emerged from the wealth of empirical and theoretical studies of LOBs.  ...  Eric Smith, Jonathan Tse, Thaleia Zariphopoulou, and Wei-Xing Zhou for useful discussions. We also thank two anonymous reviewers for many helpful comments and suggestions.  ... 
doi:10.2139/ssrn.1970185 fatcat:v4uxnocmrjeuldweww4bcqxqru
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