期刊
MANAGEMENT SCIENCE
卷 -, 期 -, 页码 -出版社
INFORMS
DOI: 10.1287/mnsc.2022.4370
关键词
frequency trading; continuous double auction; pegged orders; IEX
资金
- European Research Council under the European Union [741409]
- Center for Analytical Finance at the University of California Santa Cruz
- European Research Council (ERC) [741409] Funding Source: European Research Council (ERC)
Several financial exchanges have introduced messaging delays to protect ordinary investors from high-frequency traders. A proposed model shows how these delays can protect pegged orders and improve investor welfare, but also increase queuing costs. Empirical data supports the model's predictions.
Several financial exchanges (e.g., IEX and NYSE American) recently introduced messaging delays to protect ordinary investors from high-frequency traders who exploit stale orders. To capture the impact of such delays, we propose a simple parametric model of the continuous double auction market format. The model examines the dynamics of midpoint pegged order queues and finds their steady states. It shows how messaging delays can protect pegged orders and improve investor welfare, but typically increase queuing costs. Recently available field data show that the empirical distribution of queued pegged orders is highly leptokurtotic and resembles the discrete Laplace distribution predicted by the model.
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