The UCSC Center for Analytical Finance (CAFIN) hosted a workshop on high-frequency trading and market design on May 15th, 2015. Distinguished scholars, practitioners and policy makers attended the workshop and gave presentations on the topic from a variety of perspectives.
Participants included Jonathan Brogaard, Assistant Professor of Finance at the University of Washington Foster School of Business, Joshua Mollner, Assistant Professor of Finance at the Northwestern University Kellogg School of Management, Greg Laughlin, Professor of Astronomy and Astrophysics at UCSC, Albert Menkveld, Professor of Finance at VU University Amsterdam, Iaryna Grynkiv, Vice President at Barclays Equities Algorithmic Trading, Markus Baldauf, Assistant Professor of Finance at the University of British Columbia Sauder School of Business and Eric Aldrich, Assistant Professor of Economics at UCSC.
A highlight of the conference was a keynote address delivered by Sayee Srinivasan, the Chief Economist at the Commodity Futures Trading Commission (CFTC), the U.S. government regulator for futures and options trading.
The presentations discussed the impact of high-frequency trading on financial markets, and the extent to which it has been beneficial and detrimental. The scholarly research highlighted mechanisms whereby speed and competition among exchanges can have both positive and negative effects on markets, with mixed conclusions about the net impact that trading speed and exchange competition has had on market liquidity. Alternate exchange mechanisms were discussed, including the recently popular notion of conducting batch auctions at discrete time intervals (every 1 second or every 100 milliseconds) on financial exchanges, rather than running a continuous limit order book.
Dr. Srinivasan of the CFTC discussed his recent interest in the effects of high-frequency trading on markets. Despite growing interest in this topic over the past few years, the CFTC gained renewed interest in the area after the bond market “Flash Crash” on Oct 15, 2014. Given the large impact this event had on markets, and the unexplained nature of the event, the CFTC began dedicating more resources to the study of low-latency trading and market impact.
In sum, the workshop was a great success in a number of dimensions: it convened a core of scholars and practitioners that are making advances in the field, it set the stage for future discussions and collaborations, it brought thought provoking discussion to graduate students and faculty across departments and divisions at UCSC and it provided excellent exposure for our campus to the international research community.
