Optimal market making in the presence of latency

This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We characterize the value of an order and show that it plays the role of one-period reward in the MDP model. Based on this characterization, we provide explicit criteria for assessing the profitability of market making when there is latency. Under our model, we show that a market maker can earn a positive expected profit if there are sufficient uninformed market orders hitting the market maker's limit orders compared with the rate of price jumps, and the trading horizon is sufficiently long. In addition, our theoretical and numerical results suggest that latency can be an additional source of risk and latency impacts negatively the performance of market makers.     

Creating consumer durable retailer customer loyalty through order fulfillment service operations

Manufacturers now find themselves in the position of finding new ways to remain competitive in the era of retail power. The onus rests on the manufacturer's ability to implement operational strategies that help the retailer achieve its objectives. Specifically, manufacturers that establish successful order fulfillment service can affect retailer loyalty. The overarching goal of this research, therefore, is to examine the importance to operations managers of understanding the order fulfillment needs and expectations of their retail customers and to establish the value-added role that operations management plays in developing retailer loyalty. Empirical evidence is provided on the relationships between relational order fulfillment service, operational order fulfillment service, satisfaction, affective commitment, purchase behavior, and loyalty. Such evidence not only focuses on the strategic importance of the OM discipline in manufacturer–retailer relationships, but also extends previous OM theory by taking a more complex view of the loyalty phenomenon.     

Do aggressive orders affect liquidity? An evidence from an emerging market

This paper investigates how aggressive orders affect spreads and trading activity measures on the stock market. Based on a sample of stocks listed on the Warsaw Stock Exchange this study finds that spreads and trading activity measures increase significantly when aggressive orders are executed, but quickly revert to initial levels. The reaction to these orders on the bid and ask side of the market is similar. The effect of aggressive orders differ depending on the size of the firms. Trading activity measures such as volumes or number of transactions increase stronger for bigger than for smaller stocks, while spreads increase more for smaller firms than for bigger ones. These findings enrich the understanding of liquidity dynamics especially on the emerging markets where liquidity is an important price formation factor.     

Low-latency trading

We define low-latency activity as strategies that respond to market events in the millisecond environment, the hallmark of proprietary trading by high-frequency traders though it could include other algorithmic activity as well. We propose a new measure of low-latency activity to investigate the impact of high-frequency trading on the market environment. Our measure is highly correlated with NASDAQ-constructed estimates of high-frequency trading, but it can be computed from widely-available message data. We use this measure to study how low-latency activity affects market quality both during normal market conditions and during a period of declining prices and heightened economic uncertainty. Our analysis suggests that increased low-latency activity improves traditional market quality measures—decreasing spreads, increasing displayed depth in the limit order book, and lowering short-term volatility. Our findings suggest that given the current market structure for U.S. equities, increased low-latency activity need not work to the detriment of long-term investors.     

广西铁路多式联运发展对策研究

广西作为我国唯一与东盟国家陆海相邻的省区,发展铁路多式联运具有广阔前景和独特优势。基于联运发展环境和班列开行组织2个方面,深入阐述广西铁路多式联运发展现状,分析得出目前存在的联运基础设施亟待完善、各运输方式间协同水平较低、各运输方式分工不够合理、市场综合竞争力有待提高4个方面问题。据此,提出广西铁路多式联运发展对策,即:完善联运设备设施、加强各种交通方式融合、推进运输结构调整、优化联运产品供给、加强技术装备应用,以进一步完善广西铁路多式联运体系,提升社会物流服务整体水平。     

Market or limit orders?

In this paper we investigate the problem of optimal order placement of an asset listed on an exchange using both market and limit orders in a simple model of market dynamics. We seek to understand under which settings it is optimal to place limit or market orders. Limit orders typically lower transaction costs but increase the risk of incomplete order execution, whereas market orders typically have higher transaction costs but are guaranteed to be executed. Rather than considering order book dynamics to determine if a limit order is executed we rely on price dynamics for this. We look at implementation shortfall in this setup with market impact of trading and propose a dynamic program to find the optimal placement of both market and limit orders for risk-neutral and risk-averse traders. With this we find a bound on the expected cost of trading and show that a trader who behaves optimally should always expect to pay less to trade less. We then solve the dynamic program numerically and examine optimal order placement strategies. We find that the decision between market and limit orders is sensitive to price volatility, risk aversion, and trading costs.     

Clustering of intraday order-sizes by uninformed versus informed traders

We examine quantity choice patterns by equity traders across trading hours in the U.S. Controlling for intraday variations in trading activity, we find that traders submit more non-rounded order sizes and more order sizes overall leading up to a day’s market close. Traders who submit more distinct order sizes pay a higher cost to trade, and they are also less informed about future prices. Our results suggest that the goal to satisfy specific quantity demands rises across the day. This differs from total trading demand, which resembles a U-shape pattern intraday, but is consistent with less trade-size clustering at the ends of fiscal quarters.     

Why do traders choose dark markets?

We examine U.S. equity trader use of dark and lit markets. Marketable orders executed in the dark have lower information content and smaller fill rates. Dark orders take longer to execute, but they execute at more favorable prices. Traders are more likely to go dark when the bid-ask spread is wider and those with higher dark participation are more sophisticated. Although market regulators have expressed concern over the rise in dark trading, our results indicate that dark markets provide important benefits to traders that lit markets do not.