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Relevant papers for frequent batch auctions. To me, seems like such a hurdle to get politicians to understand what frequent batch auctions are, and how they wou

Relevant papers for frequent batch auctions. To me, seems like such a hurdle to get politicians to understand what frequent batch auctions are, and how they would help the HFT situation. Especially if the introduction paper is 84 pages long. Introduction and reasoning: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre... Implementation details: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions-ImplementationDetails.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre... Both interesting reads though. We actually implemented batch auctions as a way to set initial prices for our prediction markets at Inkling Markets (http://home.inklingmarkets.com/ http://home.inklingmarkets.com/) based off these papers.

kasey_junk 11y ago
Those are really good papers & I highly recommend them. A couple of things I've always wondered about them: - their proposal seems to require either coordinated legal regimes & consistent global clocks or a monopoly exchange, both of which on the surface seem impossible. - their matching algorithm both still has a time priority component as well as a random or pro rata component, which is problematic. - finally, the main complaint seems to be with the profitability of the arb not decreasing, but isn't that a direct function of the legislated price floor imposed on the markets?
- cdetrio 11y ago
  Global clocks aren't required, as batch intervals on different exchanges don't need to be synchronized. Although the batch interval is a window of cross-exchange risk, the uniform-price clearing means it is still more efficient (in "volume-space"). Continuous auctions have really short risk windows (more efficient in "time-space"), but the discriminatory pay-as-bid price clearing means that all that risk is shouldered by everyone but the fastest traders (who are thus able to extract arbitrage rents from the slower traders).
cdetrio 11y ago
The authors have apparently been giving presentations to various politicians/regulators, using an excellent set of slides: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions-Slides.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...

kasey_junk 11y ago

Those are really good papers & I highly recommend them. A couple of things I've always wondered about them: - their proposal seems to require either coordinated legal regimes & consistent global clocks or a monopoly exchange, both of which on the surface seem impossible. - their matching algorithm both still has a time priority component as well as a random or pro rata component, which is problematic. - finally, the main complaint seems to be with the profitability of the arb not decreasing, but isn't that a direct function of the legislated price floor imposed on the markets?

cdetrio 11y ago
Global clocks aren't required, as batch intervals on different exchanges don't need to be synchronized. Although the batch interval is a window of cross-exchange risk, the uniform-price clearing means it is still more efficient (in "volume-space"). Continuous auctions have really short risk windows (more efficient in "time-space"), but the discriminatory pay-as-bid price clearing means that all that risk is shouldered by everyone but the fastest traders (who are thus able to extract arbitrage rents from the slower traders).

cdetrio 11y ago

The authors have apparently been giving presentations to various politicians/regulators, using an excellent set of slides: http://faculty.chicagobooth.edu/eric.budish/research/HFT-FrequentBatchAuctions-Slides.pdf http://faculty.chicagobooth.edu/eric.budish/research/HFT-Fre...