I am going to try to write a bit more casually here, seeing as this is a blog. Please feel free to discuss anything that looks wrong in the comments section or over email with me. Balloon Shootdowns It seems unlikely that an HFT would use an unmaneuverable balloon. They d get blown off their useful [ ]
Aquilina, Budish, and O’Neill (ABO) today published a paper on the HFT Arms Race with the headline that estimates a latency arbitrage tax on global investors of $5B/yr. The paper shows some interesting statistics on a unique dataset, raw messages sent to the LSE which are captured and timestamped by one of LSE s TAPs. Unfortunately, [ ]
Related party transactions are a common feature of pump-and-dumps. Nefarious issuers may sell securities to their fiduciaries, affiliates, or family without disclosure to other buyers. These schemes can create the illusion that a security has a broader and deeper market than reality. Thin floats also make it easier for manipulators to create price momentum. [ ]
Ethereum tokens (ETH) are often considered commodities but not securities, like Bitcoins. [1] But I think that ETH meets any common sense definition of security and that the ETH ecosystem needs to be closely examined by securities regulators. I m not a lawyer, and not the right person to be making this argument, but it seems [ ]
1. Does your exchange engage in proprietary trading? [1] A) If so, what is the nature of the prop-trading? Does it occur on your own exchange, other exchanges, or both? B) Are there information barriers between client data and prop-trading decisions? Are customers ever front-run? C) Does prop-trading have the same access to the exchange [ ]
In many jurisdictions, a buyer of stolen goods does not acquire their legal title. This principle, nemo dat , often applies regardless of whether the buyer knows the goods were stolen. The rightful owner can sue the current holder and take possession. Bitcoins (and other cryptocurrencies) are well-known to be stolen in large quantities. Bitcoin thieves [ ]
IEX is busy setting up its listing business and has designed an auction mechanism. If I understand IEX s documentation properly and I might not [1] their auctions may have some pretty weird functionality. [2] IEX s auction documentation says: For the Opening/Closing Auction, non-displayed buy (sell) orders on the Continuous Book with a resting [ ]
Exchange fee-schedules are probably the most boring topic in market structure. But there are occasional exceptions that are almost interesting, like IEX s new fee. In essence, the new fee will charge liquidity takers an extra 30 mils if the Crumbling Quote Indicator is on at the time IEX completes an execution. [1][2] Most exchanges segment [ ]
A central challenge in economics is understanding how price affects the quantity of supply and demand, a relationship often assumed to be approximately linear. But there are markets where this notion of linearity, sometimes called elasticity, may not hold. In a paper that deserves more attention, Donier and Bouchaud show that supply/demand curves of rapidly [ ]
Speed bumps, the latest fad in market structure, are proliferating. The Chicago Stock Exchange (CHX) recently proposed a new type of speed bump in the US equities market, called the Liquidity Taking Access Delay (LTAD). [1] The SEC s decision whether to approve the LTAD could have a big impact on market structure, possibly more so [ ]