Search results
1 – 10 of 10Abhinava Tripathi, Vipul and Alok Dixit
This study aims to provide a systematic literature review of the research study in the area of limit order book (LOB) mechanism of trading and its implications for market…
Abstract
Purpose
This study aims to provide a systematic literature review of the research study in the area of limit order book (LOB) mechanism of trading and its implications for market efficiency. The study attempts to document the recent theoretical developments and empirical findings from the literature exhaustively and identifies the research gaps for future research.
Design/methodology/approach
The study uses seven reputable databases to select 2,514 research studies spanning over 1981-2018 (finally compressed to a pool of 103 articles, based on relevance and impact). The study uses bibliometric network visualization and text analytics to categorize and examine the literature. The chosen articles are compiled and analyzed to provide a comprehensive account of the current research on LOBs.
Findings
The recent LOB literature is summarized on various criteria as follows: sub-areas, the types of economies and markets, methodologies and the LOB measures. The review identifies a dearth of studies on the LOBs in emerging markets. It suggests the potential research areas as intraday studies in emerging LOB markets; application of market indicators based on deeper levels of LOB, beyond the best prices; market fragmentation, order routing decision and its impact on order execution quality; optimal display of LOB levels; liquidity dynamics in quote-driven markets vis-à-vis LOB markets; effect of high-frequency trading on market microstructure; application of advanced techniques (e.g. machine learning models, zero-intelligent models); relationship between the trading speed, order aggressiveness, shape and resilience of the order book and informed trading; and information content of the auxiliary order submission strategies, including cancellation, amendments and hidden orders.
Originality/value
For the past 15 years, to the best of the knowledge, a comprehensive review of the literature on LOBs has not been published. The financial markets have transformed significantly over this period, driven by the adoption of LOBs, low latency trading and technological advancements in information dissemination. This article provides an extensive collection and classification of the literature on LOBs. This would be useful for the practitioners, future researchers and academics in the area of financial markets.
Details
Keywords
The purpose of this paper is to provide the current state of knowledge about the Flash Crash. It has been one of the remarkable events of the decade and its causes are still a…
Abstract
Purpose
The purpose of this paper is to provide the current state of knowledge about the Flash Crash. It has been one of the remarkable events of the decade and its causes are still a matter of debate.
Design/methodology/approach
This paper reviews the literature since the early days to most recent findings, and critically compares the most important hypotheses about the possible causes of the crisis.
Findings
Among the causes of the Flash Crash, the literature has propsed the following: a large selling program triggering the sales wave, small but not negligible delays suffered by the exchange computers, the micro-structure of the financial markets, the price fall leading to margin cover and forced sales, some types of feedback loops leading to downward price spiral, stop-loss orders coupled with scarce liquidity that triggered price reduction. On its turn leading to further stop-loss activation, the use of Intermarket Sweep Orders, that is, orders that sacrificed search for the best price to speed of execution, and dumb algorithms.
Originality/value
The results of the previous section are condensed in a set of policy implications and recommendations.
Details
Keywords
Xinzhe Xu, Chaojun Yang, Daolun Chen and Gongmeng Chen
With the launch of CSI 300 Index Futures trading on April 16, 2010, China's stock market presents a more diversified trend, such as arbitrage, trends strategy entering the market…
Abstract
Purpose
With the launch of CSI 300 Index Futures trading on April 16, 2010, China's stock market presents a more diversified trend, such as arbitrage, trends strategy entering the market rapidly. Therefore, the liquidity demand also presents a higher frequency, and the change is more complex than the original situation. In recent years, many literatures are engaged in high-frequency trading (HFT) related research, and an important concern is the impact of HFT on market volatility and liquidity. Is it playing the role of stabilizing the market, or bringing more noise and turmoil? Based on this, the purpose of this study is trying to study what kind of impact the HFT have on market liquidity before and after the launch of the CSI 300 Index Futures.
Design/methodology/approach
The paper uses the simultaneous equations model of price and net order flow proposed by Deuskar and Johnson and for the first time introduces an asymmetric identification through heteroskedasticity (ITH) method. The paper applies the method to the high-frequency data of CSI 300 Index and the Futures and classifies the buying and selling orders through volume clock. The price risks are decomposed into a component driven by the impact of liquidity demand shocks (flow-driven risks (FDRs)) and a component driven by external information (information-driven risks (IDRs)).
Findings
The empirical results show that the flow-driven risk of CSI 300 Index Futures is about 20 percent. In addition, before the introduction of the Index Futures, there is no asymmetric effect between liquidity demand shocks and price shocks existing in either CSI 300 Index or CSI 300 Index Futures. While after the introduction of stock Index Futures, the asymmetric effect in the both two markets emerges. The impact of the buying net order flows on the price is less than the impact of the selling net order flows on CSI 300 Index, whereas the impact of the buying net order flows on the price is larger than the impact of the selling net order flows on CSI 300 Index Futures. The paper further analyzes the relationship between liquidity and FDR and gets the conclusion that the reasons for the deterioration of the liquidity level are caused by the impact of the external information shocks, rather than the liquidity demand shocks. And entries of HFTs like arbitrage traders and hedge traders play a positive role in improving the liquidity level in the market.
Originality/value
The paper introduces an asymmetric ITH method for the first time and finds asymmetric effect of the net order flow on the return in both CSI 300 Index market and the corresponding Index Futures market.
Details
Keywords
Heather S. Knewtson and Zachary A. Rosenbaum
The purpose of this study is to define FinTech, differentiating it from financial technology and use the definition to develop an industry framework.
Abstract
Purpose
The purpose of this study is to define FinTech, differentiating it from financial technology and use the definition to develop an industry framework.
Design/methodology/approach
Using the existing literature on FinTech and incorporating these contributions into a traditional financial structure, characteristics are outlined and placed into a framework that describes the FinTech industry.
Findings
FinTech is a specific type of Financial Technology, defined as technology used to provide financial markets a financial product or financial service, characterized by sophisticated technology relative to existing technology in that market. Firms that primarily use FinTech are classified as FinTech firms. Using these definitions, the paper provides a structure for the FinTech industry, classifying each type of FinTech firm by FinTech characteristics.
Research limitations/implications
Research that would inform the economic importance of FinTech would be served with an increased understanding of FinTech firms and the FinTech industry.
Originality/value
This paper contributes by defining FinTech and developing a comprehensive framework to describe the emerging FinTech industry.
Details
Keywords
Apart from the geometries to be dealt with, rapid prototyping (RP) of heterogeneous objects requires additional material information to be processed. This generally involves a…
Abstract
Purpose
Apart from the geometries to be dealt with, rapid prototyping (RP) of heterogeneous objects requires additional material information to be processed. This generally involves a large amount of information to be processed simultaneously. The robustness and efficiency problems, which seem less critical in homogeneous solid fabrications, become an issue. The direct impetus of this paper is to present robust and efficient algorithms for RP of heterogeneous objects.
Design/methodology/approach
The robustness is benefited from using the proposed non‐manifold heterogeneous cellular model, which guarantees gap‐free material depositions around material interfaces. The efficiency enhancement is achieved by eliminating repetitive boundary intersections and using a heuristic material interrogation approach.
Findings
By using the proposed algorithms, the robustness and efficiency of RP of heterogeneous objects can be improved. It is found that an average 30 percent efficiency improvement is obtained using the proposed heuristic material interrogation approach.
Originality/value
Non‐manifold heterogeneous cell representation (HC‐Rep) is used in RP fields for the first time. Based on the HC‐Rep, the robustness and efficiency of RP of heterogeneous object is addressed in this paper.
Details
Keywords
Sharfuddin Ahmed Khan, Simonov Kusi-Sarpong, Iram Naim, Hadi Badri Ahmadi and Adegboyega Oyedijo
The purpose of paper is to develop a performance evaluation framework for manufacturing industry to evaluate overall manufacturing performance.
Abstract
Purpose
The purpose of paper is to develop a performance evaluation framework for manufacturing industry to evaluate overall manufacturing performance.
Design/methodology/approach
The best-worst method (BWM) is used to aid in developing a performance evaluation framework for manufacturing industry to evaluate their overall performance.
Findings
The proposed BWM-based manufacturing performance evaluation framework is implemented in an Indian steel manufacturing company to evaluate their overall manufacturing performance. Operational performance of the organization is very consistent and range between 60% and 70% throughout the year. Management performance can be seen high in the 1st and 2nd quarter of the financial year ranging from 70% to 80%, whereas a slight decrease in the management performance is observed in the 3rd and 4th quarter ranging from 60% to 70%. The social stakeholder performance has a peak in first quarter ranging from 80% to 100% as at start of financial year.
Originality/value
This paper utilized BWM, a MCDM method in developing a performance evaluation index that integrates several categories of manufacturing and evaluates overall manufacturing performance. This is a novel contribution to BWM decision-making application.
Details
Keywords
The purpose of this paper is to present an overview of the flash crash, and explain why and how it happened.
Abstract
Purpose
The purpose of this paper is to present an overview of the flash crash, and explain why and how it happened.
Design/methodology/approach
The author summarizes several studies suggesting various perspectives on the flash crash and its causes. Furthermore, the author highlights recently proposed and introduced improvements and regulations to reduce the risk of having similar market collapses in the future.
Findings
It is an overview paper that highlights the state of the art on the subject.
Research limitations/implications
Paper does not report any research findings of the author.
Practical implications
High-frequency trading (HFT) along with its pros and cons is the new normal for most of the current electronic trading activity in the markets. It is well recognized by the experts that HFT may have its important shortcomings whenever the rules and regulations are not up to date to match the technological progress offering faster computational and execution capabilities.
Social implications
HFT has created a societal discussion about its benefits and potential deficiencies as the common practice for trading due to potentially unequal access to market data by various categories of participants. Such arguments help the regulators to develop improvements to reduce the market risk and nurture more robust and fair markets for all.
Originality/value
The paper has a tutorial value and summarizes the current state of HFT. The readers of more interest are guided to the most relevant literature for further reading.
Details
Keywords
Ana Sauca, Thomas Gernay, Fabienne Robert, Nicola Tondini and Jean-Marc Franssen
The purpose of this paper is to propose a method for hybrid fire testing (HFT) which is unconditionally stable, ensures equilibrium and compatibility at the interface and captures…
Abstract
Purpose
The purpose of this paper is to propose a method for hybrid fire testing (HFT) which is unconditionally stable, ensures equilibrium and compatibility at the interface and captures the global behavior of the analyzed structure. HFT is a technique that allows assessing experimentally the fire performance of a structural element under real boundary conditions that capture the effect of the surrounding structure.
Design/methodology/approach
The paper starts with the analysis of the method used in the few previous HFT. Based on the analytical study of a simple one degree-of-freedom elastic system, it is shown that this previous method is fundamentally unstable in certain configurations that cannot be easily predicted in advance. Therefore, a new method is introduced to overcome the stability problem. The method is applied in a virtual hybrid test on a 2D reinforced concrete beam part of a moment-resisting frame.
Findings
It is shown through analytical developments and applicative examples that the stability of the method used in previous HFT depends on the stiffness ratio between the two substructures. The method is unstable when implemented in force control on a physical substructure that is less stiff than the surrounding structure. Conversely, the method is unstable when implemented in displacement control on a physical substructure stiffer than the remainder. In multi-degrees-of-freedom tests where the temperature will affect the stiffness of the elements, it is generally not possible to ensure continuous stability throughout the test using this former method. Therefore, a new method is proposed where the stability is not dependent on the stiffness ratio between the two substructures. Application of the new method in a virtual HFT proved to be stable, to ensure compatibility and equilibrium at the interface and to reproduce accurately the global structural behavior.
Originality/value
The paper provides a method to perform hybrid fire tests which overcomes the stability problem lying in the former method. The efficiency of the new method is demonstrated in a virtual HFT with three degrees-of-freedom at the interface, the next step being its implementation in a real (laboratory) hybrid test.
Details
Keywords
Matt Brigida and William R. Pratt
This paper aims to investigate the quickness, and test the accuracy, of liquidity taking high-frequency traders (HFT). This gives us important insights into a class of market…
Abstract
Purpose
This paper aims to investigate the quickness, and test the accuracy, of liquidity taking high-frequency traders (HFT). This gives us important insights into a class of market participant who has come to be very influential in present markets.
Design/methodology/approach
The authors use the weekly natural gas (NG) storage report for the test because the information contained in the release often has a large effect on prices. Moreover, the NG market is heavily traded and liquid, and prone to high volatility. These factors make trading in this market attractive to HFT. The authors test for the profitability of those who trade in the first milliseconds after the report’s release; and for information leakage prior to the report.
Findings
The authors find those who trade within the first 50 ms accurately incorporate the information contained in the storage report into prices, and earn the majority of profits. In fact, HFT profits are decreasing in the time it takes them to trade after the announcement (measured to 200 ms). Further tests find no evidence of informed trading prior to the release of the report, and so the HFT reaction to the report incorporates the information contained therein into prices.
Originality/value
This is one of the few analyzes of the profitability of liquidity-taking HFT, and the only analysis that uses millisecond NG data. The data used is the exchanges original FIX/FAST messages.
Details
Keywords
The purpose of this paper is to examine the order strategies of investors, in particular their use of intermarket sweep orders (ISOs), in response to a short‐lived information…
Abstract
Purpose
The purpose of this paper is to examine the order strategies of investors, in particular their use of intermarket sweep orders (ISOs), in response to a short‐lived information event.
Design/methodology/approach
This paper uses a natural experiment on September 8, 2008, in which a 2002 bankruptcy story of United Airlines erroneously reappears through Bloomberg terminals and cause significant price changes on the stock. The authors first provide the background information of this natural experiment and use bootstrapping methods and regression analyses to examine investors' use of intermarket sweep orders.
Findings
The results show that investors use intermarket sweep orders, a unique type of liquidity‐demanding limit orders, in attempts to exploit their short‐lived information. In particular, those investors show aggressiveness not only in trade speed but also in trade size. These findings support the hypothesis that investors with short‐lived information demand immediacy to conserve the value of their information.
Research limitations/implications
The results suggest that investors on the demand side of liquidity dynamically trade off the potential adverse impact of trade‐throughs with the speed their trades are executed. How limit order traders on the supply side or liquidity suppliers in general adjust to the demand‐side dynamics remains a future research direction.
Practical implications
This paper highlights the fragility of information transmission in financial markets and suggests that the use of intermarket sweep orders could possibly magnify the impacts of erroneous information.
Originality/value
Using a natural experiment, this paper provides the first piece of empirical evidence on the use of intermarket sweep orders when investors possess short‐lived information.
Details