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Introduction to Exchanges. Chris Welty Walleye Trading. Who is this guy?. Walleye Trading. Hedge fund in Wayzata Quantitative focus ~35 employees. Exchanges. What they are Growth Quantitative Finance. History. 1602 Amsterdam Stock Exchange 1730 Dojima Rice Exchange

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introduction to exchanges
Introduction to Exchanges

Chris Welty

Walleye Trading

walleye trading
Walleye Trading
  • Hedge fund in Wayzata
  • Quantitative focus
  • ~35 employees
exchanges
Exchanges
  • What they are
  • Growth
  • Quantitative Finance
history
History
  • 1602 Amsterdam Stock Exchange
  • 1730 Dojima Rice Exchange
  • 1973 Chicago Board Options Exchange
why trade on an exchange
Why trade on an exchange?
  • Standardization
  • Liquidity
  • Information
  • Credit
  • Efficiency
who does what
Who Does What

Customer

Broker

Exchange

Market

Maker

broker
Broker
  • Accepts orders
  • Executes orders
  • Custodian
  • Credit intermediation
market maker
Market Maker
  • Provide prices
  • Provide liquidity
  • Sometimes, stabilize market
market stabilization
Market Stabilization
  • NYSE Specialist
  • Japanese
  • Price limits
  • Position limits
increasing quantitative trading
Increasing Quantitative Trading
  • Stocks
  • Foreign Exchange
  • Futures
  • Options
market growth
Market Growth
  • Reduced commissions
  • Penny pricing
  • Quantitative trading
quantitative finance
Quantitative Finance
  • Option Modeling
  • Automated Trading
black scholes model
Black-Scholes Model
  • Useful
  • Not Practical
model enhancements
Model Enhancements
  • Discrete dividends
  • Different interest rates
  • Variable volatility
  • Smile
  • Term structure
  • Proprietary
automated trading
Automated Trading
  • Algorithmic Execution
  • Low-Frequency
  • High-frequency
algorithmic execution
Algorithmic Execution
  • VWAP
  • Minimize trading cost
  • Reduce information leakage
low frequency trading
Low Frequency Trading
  • Statistical Arbitrage
  • Quantitative-based fundamental trading
high frequency trading
High Frequency Trading
  • Hot new area
  • Enabled by electronic trading
  • Analysis of large data sets