Applying Spam-Control Techniques To Negate High Frequency Trading Advantages

High Frequency Traders undoubtedly have an advantage over the average trader or trading desk because they incorporate nefarious devices into their trading schemes such as Flash Trading, Dark Pools and Quote Stuffing. In addition, they usually locate their servers as close to the exchange servers as possible so their data travels the shortest possible distance. However, adding spam-control techniques to control all trades would negate these advantages and return trading to once again being an equitable, free and open market-based system

How Do Limitations in Spectrum Fungibility Impact Spectrum Trading?

Secondary markets for spectrum trading have been considered an important solution for generating spectrum opportunities in an environment where scarcity is the rule. Nonetheless, an important factor when envisioning a successful spectrum trading environment is to consider how comparable an available frequency is to the frequency an spectrum user prefers. With this aim, we consider the fungibility scores previously determined in [1] in order to explore further parameters that can influence this quantification of the level of fungibility. Further, we merge these fungibility calculations with an existing spectrum trading model, SPECTRAD [2], seeking to determine the actual impact of the limitations of spectrum fungibility in the market viability

Evaluation of pairs trading strategy at the Brazilian financial market

Pairs trading is a popular trading strategy that tries to take advantage of market inefficiencies in order to obtain profit. The idea is simple: find two stocks that move together and take long/short positions when they diverge abnormally, hoping that the prices will converge in the future. From the academic point of view of weak market efficiency theory, pairs trading strategy shouldn’t present positive performance since, according to it, the actual price of a stock reflects its past trading data, including historical prices. This leaves us with a question, does pairs trading strategy presents positive performance for the Brazilian market? The main objective of this research is to verify the performance and risk of pairs trading in the Brazilian financial market for different frequencies of the database, daily, weekly and monthly prices for the same time period. The main conclusion of this simulation is that pairs trading strategy was a profitable and market neutral strategy at the Brazilian Market. Such profitability was consistent over a region of the strategy’s parameters. The best results were found for the highest frequency (daily), which is an intuitive result

On the dark side of the market: identifying and analyzing hidden order placements

Trading under limited pre-trade transparency becomes increasingly popular on financial markets. We provide first evidence on traders’ use of (completely) hidden orders which might be placed even inside of the (displayed) bid-ask spread. Employing TotalView-ITCH data on order messages at NASDAQ, we propose a simple method to conduct statistical inference on the location of hidden depth and to test economic hypotheses. Analyzing a wide cross-section of stocks, we show that market conditions reflected by the (visible) bid-ask spread, (visible) depth, recent price movements and trading signals significantly affect the aggressiveness of ’dark’ liquidity supply and thus the ’hidden spread’. Our evidence suggests that traders balance hidden order placements to (i) compete for the provision of (hidden) liquidity and (ii) protect themselves against adverse selection, front-running as well as ’hidden order detection strategies’ used by high-frequency traders. Accordingly, our results show that hidden liquidity locations are predictable given the observable state of the market

When is electromagnetic spectrum fungible?

Fungibility is a common assumption for market-based spectrum management. In this paper, we explore the dimensions of practical fungibility of frequency bands from the point of view of the spectrum buyer who intends to use it. The exploration shows that fungibility is a complex, multidimensional concept that cannot casually be assumed. We develop two ideas for quantifying fungibility-(i) of a fungibility space in which the 'distance' between two slices of spectrum provides score of fungibility and (ii) a probabilistic score of fungibility. © 2012 IEEE

A proposal of a methodological framework with experimental guidelines to investigate clustering stability on financial time series

We present in this paper an empirical framework motivated by the practitioner point of view on stability. The goal is to both assess clustering validity and yield market insights by providing through the data perturbations we propose a multi-view of the assets' clustering behaviour. The perturbation framework is illustrated on an extensive credit default swap time series database available online at www.datagrapple.com.Comment: Accepted at ICMLA 201