Download or read book The Impact of Electronic Trading on Liquidity written by Alex Frino and published by . This book was released on 2015 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: During 1999 and 2000, three major futures exchanges transferred trading in stock index futures from open outcry to electronic markets: the London International Financial Futures and Options Exchange (LIFFE); Sydney Futures Exchange (SFE); and Hong Kong Futures Exchange (HKFE). These changes in trading systems provide unique natural experiments to assess the relative liquidity of open outcry and electronic markets. After controlling for price volatility and trading volume, bid-ask spreads are found to be lower under the electronic trading regimes implemented by all three exchanges, with significantly lower bid-ask spreads recorded for the electronic trading systems of the SFE and HKFE. This provides some evidence that electronic trading can facilitate higher levels of liquidity relative to floor traded markets. Evidence is found, however, that bid-ask spreads become wider in response to higher price volatility under electronic trading, relative to floor trading. This indicates that the performance of electronic trading systems deteriorates during periods of higher price volatility.
Download or read book Liquidity Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
Download or read book The Effect of Maker Taker Pricing on Market Liquidity in Electronic Trading Systems Empirical Evidence from European Equity Trading written by Marco Lutat and published by . This book was released on 2014 with total page 14 pages. Available in PDF, EPUB and Kindle. Book excerpt: European equity trading mainly takes place in electronic order-driven systems. In those systems two groups of traders post their orders. One group makes liquidity by submitting limit orders while the other takes liquidity by submitting market orders. A high degree of liquidity is widely seen as the most important criterion for a market's quality and efficiency. The introduction of the Markets in Financial Instruments Directive led to the emergence of new trading venues across Europe. Those venues prefer traders making liquidity by the fees they charge in order to improve liquidity and attract market share from established exchanges. This is referred to as maker-taker pricing. Although controversial and not proven if it is advisable for an established exchange to do the same, some exchanges also introduced maker-taker pricing against the background of that new competition. In this paper we will empirically investigate the introduction of maker-taker pricing by the SWX Europe Exchange and its impact on market liquidity by means of an event study methodology. Our findings suggest that maker-taker pricing does not affect spreads, but leads to an increase in the number of shares quoted at the top of the order book.
Download or read book Equity Markets in Action written by Robert A. Schwartz and published by John Wiley & Sons. This book was released on 2004-10-06 with total page 482 pages. Available in PDF, EPUB and Kindle. Book excerpt: An in-depth look at the nature of market making and exchanges From theory to practicalities, this is a comprehensive, up-to-date handbook and reference on how markets work and the nuances of trading. It includes a CD with an interactive trading simulation. Robert A. Schwartz, PhD (New York, NY), is Marvin M. Speiser Professor of Finance and University Distinguished Professor in the Zicklin School of Business, Baruch College, CUNY. Reto Francioni, PhD (Zurich, Switzerland), is President and Chairman of the Board of SWX, the Swiss Stock Exchange, and former co-CEO of Consors Discount Broker AG, Nuremberg.
Download or read book Informed Traders as Liquidity Providers written by Alexandra Hachmeister and published by Springer Science & Business Media. This book was released on 2007-11-03 with total page 188 pages. Available in PDF, EPUB and Kindle. Book excerpt: Alexandra Hachmeister’s thesis empirically analyzes and positively answers the question whether informed traders provide liquidity in an open limit order book. The analyses include a detailed market description of the German equity market, a new methodological approach for the identification of informed traders as well as the analysis of the individual liquidity providing and demanding behavior of the identified informed traders.
Download or read book Trading and Electronic Markets What Investment Professionals Need to Know written by Larry Harris and published by CFA Institute Research Foundation. This book was released on 2015-10-19 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: The true meaning of investment discipline is to trade only when you rationally expect that you will achieve your desired objective. Accordingly, managers must thoroughly understand why they trade. Because trading is a zero-sum game, good investment discipline also requires that managers understand why their counterparties trade. This book surveys the many reasons why people trade and identifies the implications of the zero-sum game for investment discipline. It also identifies the origins of liquidity and thus of transaction costs, as well as when active investment strategies are profitable. The book then explains how managers must measure and control transaction costs to perform well. Electronic trading systems and electronic trading strategies now dominate trading in exchange markets throughout the world. The book identifies why speed is of such great importance to electronic traders, how they obtain it, and the trading strategies they use to exploit it. Finally, the book analyzes many issues associated with electronic trading that currently concern practitioners and regulators.
Download or read book Market Liquidity written by Thierry Foucault and published by Oxford University Press. This book was released on 2023 with total page 531 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Download or read book The High Frequency Game Changer written by Paul Zubulake and published by John Wiley & Sons. This book was released on 2011-04-05 with total page 177 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial industry's leading independent research firm's forward-looking assessment into high frequency trading Once regarded as a United States-focused trend, today, high frequency trading is gaining momentum around the world. Yet, while high frequency trading continues to be one of the hottest trends in the markets, due to the highly proprietary nature of the computer transactions, financial firms and institutions have made very little available in terms of information or "how-to" techniques. That's all changed with The High Frequency Game Changer: How Automated Trading Strategies Have Revolutionized the Markets. In the book, Zubulake and Lee present an overview of how high frequency trading is changing the face of the market. The book Explains how we got here and what it means to traders and investors Details how to build a high frequency trading firm, including the relevant tools, strategies, and trading talent Defines key components common to HFT such as algorithms, low latency trading infrastructure, collocation etc. The High Frequency Game Changer takes a highly controversial and extremely complicated subject and makes it accessible to anyone with an interest or stake in financial markets.
Download or read book Electronic Trading Systems written by Hugues Levecq and published by . This book was released on 2015 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern financial markets compete aggressively for trading activity and investor interest.Information technology, once a crucial element in streamlining paper flows andoperations, is now a strategic resource used in attracting or retaining market liquidity.Established exchanges introduce technology to enhance their markets. New marketvenues challenge the status quo and rely on technology to offer diverse services toincreasingly sophisticated investors. In this paper, we examine the strategic designdecisions embedded in these new electronic trading systems. Design decisions arecritical, as they determine the market microstructure which influences investingstrategies, patterns of trade, liquidity and volatility. We propose a taxonomy of designalternatives based on six major dimensions: market structure, type of orders, orderexecution priority rules, price discovery rules, time stamping, and transparency. Usingexamples of existing systems, we discuss the potential impact of the various alternativeson the eventual attractiveness of the market to the investors.
Download or read book Reshaping the Equity Markets written by Robert Alan Schwartz and published by Irwin Professional Publishing. This book was released on 1993 with total page 468 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Liquidity Trading Rules and Electronic Trading Systems written by Lawrence E. Harris and published by . This book was released on 1991 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Market Microstructure In Practice Second Edition written by Charles-albert Lehalle and published by World Scientific. This book was released on 2018-01-18 with total page 366 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book exposes and comments on the consequences of Reg NMS and MiFID on market microstructure. It covers changes in market design, electronic trading, and investor and trader behaviors. The emergence of high frequency trading and critical events like the'Flash Crash' of 2010 are also analyzed in depth.Using a quantitative viewpoint, this book explains how an attrition of liquidity and regulatory changes can impact the whole microstructure of financial markets. A mathematical Appendix details the quantitative tools and indicators used through the book, allowing the reader to go further independently.This book is written by practitioners and theoretical experts and covers practical aspects (like the optimal infrastructure needed to trade electronically in modern markets) and abstract analyses (like the use on entropy measurements to understand the progress of market fragmentation).As market microstructure is a recent academic field, students will benefit from the book's overview of the current state of microstructure and will use the Appendix to understand important methodologies. Policy makers and regulators will use this book to access theoretical analyses on real cases. For readers who are practitioners, this book delivers data analysis and basic processes like the designs of Smart Order Routing and trade scheduling algorithms.In this second edition, the authors have added a large section on orderbook dynamics, showing how liquidity can predict future price moves, and how High Frequency Traders can profit from it. The section on market impact has also been updated to show how buying or selling pressure moves prices not only for a few hours, but even for days, and how prices relax (or not) after a period of intense pressure.Further, this edition includes pages on Dark Pools, Circuit Breakers and added information outside of Equity Trading, because MiFID 2 is likely to push fixed income markets towards more electronification. The authors explore what is to be expected from this change in microstructure. The appendix has also been augmented to include the propagator models (for intraday price impact), a simple version of Kyle's model (1985) for daily market impact, and a more sophisticated optimal trading framework, to support the design of trading algorithms.
Download or read book Measuring Liquidity in Financial Markets written by Abdourahmane Sarr and published by International Monetary Fund. This book was released on 2002-12 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides an overview of indicators that can be used to illustrate and analyze liquidity developments in financial markets. The measures include bid-ask spreads, turnover ratios, and price impact measures. They gauge different aspects of market liquidity, namely tightness (costs), immediacy, depth, breadth, and resiliency. These measures are applied in selected foreign exchange, money, and capital markets to illustrate their operational usefulness. A number of measures must be considered because there is no single theoretically correct and universally accepted measure to determine a market's degree of liquidity and because market-specific factors and peculiarities must be considered.
Download or read book The Challenge of Information Technology for the Securities Markets written by Salomon Brothers Center for the Study of Financial Institutions and published by McGraw-Hill Professional Publishing. This book was released on 1989 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Electronic Trading on Market Liquidity and Stock Price Behavior written by Majd Munir Iskandrani and published by . This book was released on 2012 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Comparative Analysis of the Determinants and Pricing of Liquidity in Floor and Electronic Trading Systems written by Mohammad Ibrahim Diab Tayeh and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years many stock exchanges have moved away from floor-based to automated-based trading systems. However, the choice between these alternative trading systems is a major concern for stock exchange regulators and designers, and the impact of their merits on market characteristics (e.g. liquidity) is controversial. This thesis is motivated by the desire to shed light on this controversy, and therefore aims to offer a comparative analysis of various aspects of liquidity under floor and automated trading systems. More specifically, within the context of different trading systems (i.e. floor versus electronic), this thesis examines three empirical issues: firstly, the determinants of market-wide liquidity and its time-series behaviour; secondly, whether market-wide and firm-specific liquidity are priced in assets returns; and finally, whether the cross-sectional variations in firm-specific liquidity could be explained by the cross-sectional variations in information asymmetry and divergence of opinion. The findings of this thesis can be summarized as follows. Firstly, market-wide liquidity is significantly influenced by market returns, market volatility, interest rate variables and the announcement of macroeconomic indicators. Market-wide liquidity also shows distinct day-of-the-week regularities and a distinct pattern around holidays. The impact of some factors on market-wide liquidity, and the time-series behaviour of market-wide liquidity on the floor trading system in some markets is higher than that on the electronic trading systems. Secondly, market-wide liquidity has a significant impact on assets returns, and after controlling for its effect, firm-specific liquidity has a significant effect on risk-adjusted returns. The liquidity premium required on market-wide and firm-specific liquidity, for some proxies of liquidity in some markets, is higher on an automated trading system than on a floor trading system. Finally, firm-specific liquidity is negatively related to the level of information asymmetry. However, the evidence for the impact of divergence of opinion on firm-specific liquidity is inconclusive; a higher level of divergence of opinion results in higher liquidity, which supports the optimistic view; and firm-specific liquidity decreases with divergence of opinion, which is consistent with the view that disagreement among investors is a source of risk. Additionally, after automation, the impact of information asymmetry (divergence of opinion) on firm-specific liquidity is greater (lesser) than that before automation. Overall, this thesis demonstrates that the design and the structure of markets is closely linked to the latter?s performance and that the change to automated trading systems has significant implications for liquidity. As such, this study should be a valuable reference point for stock exchanges that have introduced automation, or are considering doing so.
Download or read book Trading and Exchanges written by Larry Harris and published by OUP USA. This book was released on 2003 with total page 664 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focusing on market microstructure, Harris (chief economist, U.S. Securities and Exchange Commission) introduces the practices and regulations governing stock trading markets. Writing to be understandable to the lay reader, he examines the structure of trading, puts forward an economic theory of trading, discusses speculative trading strategies, explores liquidity and volatility, and considers the evaluation of trader performance. Annotation (c)2003 Book News, Inc., Portland, OR (booknews.com).
