modern microstructure high frequency trading spread capture and the flash crash n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Modern Microstructure: High Frequency Trading, Spread Capture, and The Flash Crash PowerPoint Presentation
Download Presentation
Modern Microstructure: High Frequency Trading, Spread Capture, and The Flash Crash

Loading in 2 Seconds...

play fullscreen
1 / 8

Modern Microstructure: High Frequency Trading, Spread Capture, and The Flash Crash - PowerPoint PPT Presentation


  • 158 Views
  • Uploaded on

Modern Microstructure: High Frequency Trading, Spread Capture, and The Flash Crash. Questions to think about in advance. How should Market Quality be measured? What is the impact of High Frequency Trading on Market Quality? What caused the Flash Crash?

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'Modern Microstructure: High Frequency Trading, Spread Capture, and The Flash Crash' - julian-whitfield


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
modern microstructure high frequency trading spread capture and the flash crash
Modern Microstructure:

High Frequency Trading, Spread Capture, and The Flash Crash

questions to think about in advance
Questions to think about in advance
  • How should Market Quality be measured?
  • What is the impact of High Frequency Trading on Market Quality?
  • What caused the Flash Crash?
  • What was the impact of the Flash Crash?
  • What can/needs to be done to prevent another Flash Crash?
outline
Outline
  • Market Making
  • Order Placement
  • High Frequency Trading and Market Quality
  • Analytics
  • Synthesis: The Flash Crash
market making
Consideration

Spread

Potential rebate

Costs

Adverse selection

Information leakage

Strategies

Place

Revise

Cancel

Did market making activities contribute to the flash crash?

Market Making
order placement
Order Placement
  • Order Placement is at the Heart of Algorithmic Trading
  • Algorithmic Logic
  • Algorithmic Degrees of Freedom
    • Price
    • Timing
    • Size
    • Destination
      • Sofianos, Xiang, and Yousefi
      • "All-in shortfall and optimal order placement", January 2011
      • "Going to the races: venue toxicity comparisons", December 2010
      • "'Good fills, bad fills' and venue toxicity", November 2010
  • Potential Results
hft market quality
HFT & Market Quality
  • Recent Research:
  • "An analysis of trades by high frequency participants on the London Stock Exchange“ Jarnecic and Snape, 2010
  • "High frequency trading and its impact on market quality“ Brogaard, 2010
  • "Low-latency trading“ Hasbrouck and Saar, 2010
  • "Algorithmic trading and information“ Hendershott and Riordan, 2009
  • "Does algorithmic trading improve liquidity?“ Hendershott, Jones, and Menkveld, 2010
analytics
Analytics
  • Watching market action in real-time
  • P&L versus various benchmarks
  • Interval volumes
  • Destination Attribution
the flash crash
Setting the stage

Market down ~ 2.5%

Greek unrest

Bid side liquidity shrinking

The e-mini trade

Only 9% of volume

Created unusual flurry of HF activity

Contract went limit down

Equities and ETFs

Lots on cancelling with no replenishment

Retail stop-loss market orders triggered

Many matched with “stub” orders left on book

Who is to blame?

Waddell and Reed

Barclays

Retail investors

Agent for retail customers

HF market makers

Regulation

Market structure

All of the above?

Regulatory Response

Single Stock Circuit Breakers

Ban On Naked Access

Consolidated Audit Trail

The Flash Crash