High Frequency Market Microstructure - A Comprehensive Overview

Slide Note
Embed
Share

Delve into the intricate world of high-frequency market microstructure with a detailed exploration of how traders operate, market structures, regulatory influences, and the evolution of trading platforms. Uncover the birth of High-Frequency Trading (HFT), the strategies employed by high-frequency traders, and the impact on non-high-frequency traders and retail traders. Examine the role of technology, regulatory issues, market linkages, and the concept of fairness in this dynamic landscape.


Uploaded on Sep 11, 2024 | 0 Views


Download Presentation

Please find below an Image/Link to download the presentation.

The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.

E N D

Presentation Transcript


  1. High Frequency Market Microstructure Author: Maureen O Hara Presented by: Xingyi Zhou Topics in Quantitative Finance 1 9/11/2024

  2. Outline The New High Frequency World The way traders trade High frequency trader Non high frequency trader (everyone else) The way markets are structured The role of regulatory change The organization of trading Exchange pricing models Order priority rules The development of new trading platforms Enjoying a quiet life 2 9/11/2024

  3. Introduction Gaps in Microstructure Research for High Frequency Trading Information Market data Analyzing data Regulatory and Policy Issues needing further study Market linkages Issue of Fairness Enjoying a quiet life 3 9/11/2024

  4. Birth of HFT Market fragmentation Regulation Arbitrage Technology Enjoying a quiet life 4 9/11/2024

  5. High Frequency Trader Speed Done by Computer Strategy Based Markets matching engine HFT market making (only on one side of the book in each stock) Complex opportunistic algorithms (TWAP, Momentum ignition strategy) Predatory algorithms (manipulate price) Enjoying a quiet life 5 9/11/2024

  6. Non-high frequency traders Speed trade is now fast for every one Done by Computer Supply and demand liquidity Strategy Based Dark Trading (smaller sizes) Enjoying a quiet life 6 9/11/2024

  7. Non-high frequency traders Enjoying a quiet life 7 9/11/2024

  8. Retail Traders Largely via broker-dealer firms DMMs(designated marker makers) and SLPs(strategic liquidity providers) trading costs declined Enjoying a quiet life 8 9/11/2024

  9. Exchanges and Other Markets Dilemma-ending of one size fits all Different order type Access and Speed Market Pricing Structure Maker-taker Taker-maker Subscription market Enjoying a quiet life 9 9/11/2024

  10. Changes in Microstructure Information Asset and time related Turns public information into private information Trade imbalance Market data Sequence of trade becomes informative Trading intentions and trades executed can be very different No relation between order balance and high-low price Data analysis Consolidated tape: data could be out of order Empirical analyses using quote data Market dynamics (realized spread) VPIN(weighted probability of informed trading) Enjoying a quiet life 10 9/11/2024

  11. Research and the Regulatory Agenda Market linkages Trade through rule Trade at The issue of fairness Should exchanges be allowed to offer specialized order types targeted at high frequency traders? Should exchanges be allowed to offer colocation for a fee? Is it fair for exchanges to sell some traders information before it is available to others? Enjoying a quiet life 11 9/11/2024

  12. Thank you! Enjoying a quiet life 12 9/11/2024

Related


More Related Content