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Order protection through delayed messaging
[working paper]
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Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the... view more
Several financial exchanges have recently introduced messaging delays (e.g., a 350 microsecond delay at IEX and NYSE American) intended to protect ordinary investors from high-frequency traders who exploit stale orders. We propose an equilibrium model of this exchange design as a modification of the standard continuous double auction market format. The model predicts that a messaging delay will generally improve price efficiency and lower transactions cost but will increase queuing costs. Some of the predictions are testable in the field or in a laboratory environment.... view less
Classification
Political Economy
Free Keywords
IEX; continuous double auction; high-frequency trading; lab experiments; market design
Document language
English
Publication Year
2017
City
Berlin
Page/Pages
43 p.
Series
Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Forschungsprofessur Market Design: Theory and Pragmatics, SP II 2017-502
Handle
https://hdl.handle.net/10419/173265
Status
Published Version; reviewed
Licence
Deposit Licence - No Redistribution, No Modifications