scholarly journals The Ethics of Financial Market Making and Its Implications for High-Frequency Trading

2021 ◽  
Author(s):  
Andrea Roncella ◽  
Ignacio Ferrero
Keyword(s):  
Financial Market ◽  
High Frequency ◽  
Common Good ◽  
High Frequency Trading ◽  
Wealth Accumulation ◽  
Real Economy ◽  
Market Making ◽  
Modern Times ◽  
Financial Innovations ◽  
The Common

AbstractDuring the last 20 years, the financial sector has undergone an unprecedented transformation due to new regulations and the implementation of several technological advancements. The combination of regulation and technology has brought about new financial processes that have fundamentally changed how financial market making is done. This paper studies the ethics of financial market making and its implications for one of the most controversial financial innovations of modern times, namely high-frequency trading (HFT). We claim that the Aristotelian distinction between natural chrematistics, which is aimed at serving the real economy, and unnatural chrematistics, whose ultimate purpose is wealth accumulation, can be a useful criterion to assess the ethics of financial market making and the goodness of an innovation as HFT, and how it can serve the common good of society. This approach can be defined as ‘purpose oriented’ or ‘purpose fulfillment’.

Global Algorithmic Capital Markets

2018 ◽  
Keyword(s):  
Public Policy ◽  
Capital Markets ◽  
Systemic Risk ◽  
High Frequency ◽  
Investor Protection ◽  
High Frequency Trading ◽  
Market Making ◽  
Market Governance ◽  
Policy Objectives ◽  
The Impact

This book illustrates and assesses the dramatic recent transformations in capital markets worldwide and the impact of those transformations. ‘Market making’ by humans in centralized markets has been replaced by supercomputers and algorithmic high frequency trading operating in often highly fragmented markets. How do recent market changes impact on core public policy objectives such as investor protection, reduction of systemic risk, fairness, efficiency, and transparency in markets? The operation and health of capital markets affect all of us and have profound implications for equality and justice in society. This unique set of chapters by leading scholars, industry insiders, and regulators sheds light on these and related questions and discusses ways to strengthen market governance for the benefit of society at large.

scholarly journals The Concepts of Common Good and Public Interest: From Plato to Biobanking

2011 ◽  
Vol 20 (4) ◽  
pp. 554-562 ◽  
Author(s):  
KADRI SIMM
Keyword(s):  
Public Interest ◽  
Common Good ◽  
Modern Times ◽  
The Common Good ◽  
Worthy Goal ◽  
The Common

The expression “common good” usually conjures up benevolent associations: it is something to be desired, a worthy goal, and it would be a brave person who declared he or she was against the common good. Yet modern times have taught us to be critical and even suspicious of such grand rhetoric, leading us to query what lies behind this ambitious notion, who formulates what it stands for, and how such formulations have been reached.

scholarly journals High‑Frequency Trading in the Modern Market Microstructure: Opportunities and Threats

2019 ◽  
Vol 7 (3) ◽  
pp. 25-36
Author(s):  
M. Zharikov
Keyword(s):  
Financial Markets ◽  
Financial Market ◽  
Market Microstructure ◽  
High Frequency ◽  
Financial Engineering ◽  
Market Design ◽  
High Frequency Trading ◽  
Optimal Trading ◽  
Trading Market ◽  
Long Run

The article covers some ideas about the research on high-frequency trading and financial market design. The topic is time-relevant because today there exists a need to convince traders that there is a simple structural floor in the way that the financial markets are designed. The article reveals the significance of trading on the floor that the foremost fundamental constraint is limited time. The author proves that time on the financial market feels, to some extent, infinite when someone counts it in millions of seconds, but time is nevertheless finite. The author then gets into the actual research on high-frequency trading in the financial market design. The motivation for this project is to analyse activity among high-frequency trading firms by which investments of substantial sums of money are understood as economically trivial speed improvements. The theoretical significance of the research’s outcomes lies in outlaying the systemic approach to dealing with stochastic control problems in the context of financial engineering. The practical relevance of the paper lies in the mechanism that allows solving problems surrounding optimal trading, market microstructure, high-frequency trading, etc. The article concludes by talking about the issues in the modern electronic markets and by giving lessons to dealing with them in the long run.

scholarly journals A financial market with singular drift and no arbitrage

2020 ◽  
Author(s):  
Nacira Agram ◽  
Bernt Øksendal
Keyword(s):  
Brownian Motion ◽  
Financial Market ◽  
High Frequency ◽  
Continuous Process ◽  
Mathematical Finance ◽  
Market Model ◽  
High Frequency Trading ◽  
No Arbitrage ◽  
Drift Term ◽  
Singular Drift

AbstractWe study a financial market where the risky asset is modelled by a geometric Itô-Lévy process, with a singular drift term. This can for example model a situation where the asset price is partially controlled by a company which intervenes when the price is reaching a certain lower barrier. See e.g. Jarrow and Protter (J Bank Finan 29:2803–2820, 2005) for an explanation and discussion of this model in the Brownian motion case. As already pointed out by Karatzas and Shreve (Methods of Mathematical Finance, Springer, Berlin, 1998) (in the continuous setting), this allows for arbitrages in the market. However, the situation in the case of jumps is not clear. Moreover, it is not clear what happens if there is a delay in the system. In this paper we consider a jump diffusion market model with a singular drift term modelled as the local time of a given process, and with a delay $$\theta > 0$$ θ > 0 in the information flow available for the trader. We allow the stock price dynamics to depend on both a continuous process (Brownian motion) and a jump process (Poisson random measure). We believe that jumps and delays are essential in order to get more realistic financial market models. Using white noise calculus we compute explicitly the optimal consumption rate and portfolio in this case and we show that the maximal value is finite as long as $$\theta > 0$$ θ > 0 . This implies that there is no arbitrage in the market in that case. However, when $$\theta $$ θ goes to 0, the value goes to infinity. This is in agreement with the above result that is an arbitrage when there is no delay. Our model is also relevant for high frequency trading issues. This is because high frequency trading often leads to intensive trading taking place on close to infinitesimal lengths of time, which in the limit corresponds to trading on time sets of measure 0. This may in turn lead to a singular drift in the pricing dynamics. See e.g. Lachapelle et al. (Math Finan Econom 10(3):223–262, 2016) and the references therein.

High-Frequency Trading in the Stock Market and the Costs of Option Market Making

2020 ◽  
Author(s):  
Mahendrarajah Nimalendran ◽  
Khaladdin Rzayev ◽  
Satchit Sagade
Keyword(s):  
Stock Market ◽  
High Frequency ◽  
High Frequency Trading ◽  
Market Making ◽  
Option Market

scholarly journals Georg von Neumayer’s legacy in geomagnetism

2011 ◽  
Vol 123 (1) ◽  
pp. 62
Author(s):  
Charles Barton ◽  
Doug Morrison ◽  
Adrian Hitchman
Keyword(s):  
Common Good ◽  
Global Scale ◽  
International Polar Year ◽  
Modern Times ◽  
Polar Science ◽  
International Polar ◽  
The Common ◽  
Auroral Physics ◽  
Magnetic Disturbances ◽  
Magnetic Observatories

Terrestrial magnetism—its temporal and spatial manifestations and origins—has fascinated humans for 2000 years and has long been exploited for navigation. But not until the 19th and early 20th century was systematic mapping and observation of the field undertaken on a global scale, a satisfactory mathematical theory of magnetism developed, and a dynamo origin in the core identified. Georg von Neumayer was one of the leading luminaries who laid the observational basis for these advances. His principal contributions were in persistent and meticulous observation of earth and space science phenomena, particularly in the southern hemisphere, often carried out under challenging conditions. This talk traces the development to modern times of the areas of geomagnetism where von Neumayer played a pioneering role—establishing a world network of magnetic observatories, mapping and modelling of the geomagnetic field, the quest for the origin of the field, exploration geophysics (diagnostic use of magnetic fields to characterise subsurface bodies and geology), solar-terrestrial effects and auroral physics, magnetic disturbances and a relationship with weather, polar science and more. Perhaps his greatest legacy is in the foundation of a spirit of peaceful scientific collaboration between nations and sharing information for the common good. This is best exemplified by his lead role in the first International Polar Year (1882–1883) and its sequel today—the 4th IPY 2007–2008.

Financial Market Manipulation, Whistleblowing, and the Common Good: Evidence from the LIBOR Scandal

Abacus ◽  
2021 ◽  
Author(s):  
Jonathan A. Batten ◽  
Igor LonČarski ◽  
Peter G. Szilagyi
Keyword(s):  
Financial Market ◽  
Common Good ◽  
Good Evidence ◽  
Market Manipulation ◽  
The Common Good ◽  
The Common

scholarly journals Risk and Return in High-Frequency Trading

2018 ◽  
Vol 54 (3) ◽  
pp. 993-1024 ◽  
Author(s):  
Matthew Baron ◽  
Jonathan Brogaard ◽  
Björn Hagströmer ◽  
Andrei Kirilenko
Keyword(s):  
Risk Management ◽  
High Frequency ◽  
Empirical Support ◽  
High Frequency Trading ◽  
Information Channel ◽  
Market Making ◽  
Risk And Return ◽  
Study Performance

We study performance and competition among firms engaging in high-frequency trading (HFT). We construct measures of latency and find that differences in relative latency account for large differences in HFT firms’ trading performance. HFT firms that improve their latency rank due to colocation upgrades see improved trading performance. The stronger performance associated with speed comes through both the short-lived information channel and the risk management channel, and speed is useful for various strategies, including market making and cross-market arbitrage. We find empirical support for many predictions regarding relative latency competition.

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