The Application of SAS® Hash Object to Ultra-High Frequency Financial Data: A Case Study in Limit Order Book Reconstruction

2011 ◽  
Author(s):  
Dorian M. Noel
Keyword(s):  
High Frequency ◽  
Limit Order Book ◽  
Financial Data ◽  
Order Book ◽  
Limit Order ◽  
Ultra High Frequency

scholarly journals Optimal inventory management and order book modeling

2019 ◽  
Vol 65 ◽  
pp. 145-181 ◽  
Author(s):  
Nicolas Baradel ◽  
Bruno Bouchard ◽  
David Evangelista ◽  
Othmane Mounjid
Keyword(s):  
Inventory Management ◽  
High Frequency ◽  
Limit Order Book ◽  
Order Book ◽  
Value Functions ◽  
Limit Order ◽  
Terminal Wealth ◽  
Market Makers ◽  
Market Participants ◽  
The One

We model the behavior of three agent classes acting dynamically in a limit order book of a financial asset. Namely, we consider market makers (MM), high-frequency trading (HFT) firms, and institutional brokers (IB). Given a prior dynamic of the order book, similar to the one considered in the Queue-Reactive models [12, 18, 19], the MM and the HFT define their trading strategy by optimizing the expected utility of terminal wealth, while the IB has a prescheduled task to sell or buy many shares of the considered asset. We derive the variational partial differential equations that characterize the value functions of the MM and HFT and explain how almost optimal control can be deduced from them. We then provide a first illustration of the interactions that can take place between these different market participants by simulating the dynamic of an order book in which each of them plays his own (optimal) strategy.

High Frequency Asymptotics for the Limit Order Book

2016 ◽  
Vol 02 (01) ◽  
pp. 1650004 ◽  
Author(s):  
Peter Lakner ◽  
Josh Reed ◽  
Sasha Stoikov
Keyword(s):  
Poisson Process ◽  
High Frequency ◽  
Limit Order Book ◽  
Order Book ◽  
Limit Order ◽  
Limit Orders ◽  
Long Run ◽  
Frequency Regime ◽  
Market Orders ◽  
The One

We study the one-sided limit order book corresponding to limit sell orders and model it as a measure-valued process. Limit orders arrive to the book according to a Poisson process and are placed on the book according to a distribution which varies depending on the current best price. Market orders to buy periodically arrive to the book according to a second, independent Poisson process and remove from the book the order corresponding to the current best price. We consider the above described limit order book in a high frequency regime in which the rate of incoming limit and market orders is large and traders place their limit sell orders close to the current best price. Our first set of results provide weak limits for the unscaled price process and the properly scaled measure-valued limit order book process in the high frequency regime. In particular, we characterize the limiting measure-valued limit order book process as the solution to a measure-valued stochastic differential equation. We then provide an analysis of both the transient and long-run behavior of the limiting limit order book process.

Patience vs. impatience of traders: Formation of the value-at-price distribution through competition for liquidity

2015 ◽  
Vol 02 (03) ◽  
pp. 1550029
Author(s):  
Peter Lerner
Keyword(s):  
Asymptotic Distribution ◽  
High Frequency ◽  
Imperfect Information ◽  
Limit Order Book ◽  
Order Book ◽  
Short Term ◽  
Limit Order ◽  
Price Distribution ◽  
Realistic Representation ◽  
Dynamic Version

The ability to postpone one's execution in the market without penalty in search of a better price is an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution price from market expectations and quotes. Equilibrium theory was provided in 2005 by Foucault, Kadan and Kandel. I derive an asymptotic distribution of the bids/offers as a function of the ratio of patient and impatient traders using the dynamic version of the Foucault, Kadan and Kandel limit order book (LOB) model. Our version of the LOB model allows stylized, but sufficiently realistic representation of the trading markets. In particular, dynamic LOB allows simulation of the distribution of execution times and spreads from high-frequency quotes. Significant analytic progress is made toward framing of short-term trading as competition for immediacy of execution between traders under imperfect information. The results are qualitatively compared with empirical volume-at-price distribution of highly liquid stocks.

scholarly journals The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response *

2015 ◽  
Vol 130 (4) ◽  
pp. 1547-1621 ◽  
Author(s):  
Eric Budish ◽  
Peter Cramton ◽  
John Shim
Keyword(s):  
High Frequency ◽  
Market Design ◽  
Limit Order Book ◽  
Theory Model ◽  
Arms Race ◽  
High Frequency Trading ◽  
Continuous Limit ◽  
Order Book ◽  
Limit Order ◽  
Arbitrage Opportunities

Abstract The high-frequency trading arms race is a symptom of flawed market design. Instead of the continuous limit order book market design that is currently predominant, we argue that financial exchanges should use frequent batch auctions: uniform price double auctions conducted, for example, every tenth of a second. That is, time should be treated as discrete instead of continuous, and orders should be processed in a batch auction instead of serially. Our argument has three parts. First, we use millisecond-level direct-feed data from exchanges to document a series of stylized facts about how the continuous market works at high-frequency time horizons: (i) correlations completely break down; which (ii) leads to obvious mechanical arbitrage opportunities; and (iii) competition has not affected the size or frequency of the arbitrage opportunities, it has only raised the bar for how fast one has to be to capture them. Second, we introduce a simple theory model which is motivated by and helps explain the empirical facts. The key insight is that obvious mechanical arbitrage opportunities, like those observed in the data, are built into the market design—continuous-time serial-processing implies that even symmetrically observed public information creates arbitrage rents. These rents harm liquidity provision and induce a never-ending socially wasteful arms race for speed. Last, we show that frequent batch auctions directly address the flaws of the continuous limit order book. Discrete time reduces the value of tiny speed advantages, and the auction transforms competition on speed into competition on price. Consequently, frequent batch auctions eliminate the mechanical arbitrage rents, enhance liquidity for investors, and stop the high-frequency trading arms race.

scholarly journals High-frequency trading in a limit order book

2008 ◽  
Vol 8 (3) ◽  
pp. 217-224 ◽  
Author(s):  
Marco Avellaneda ◽  
Sasha Stoikov
Keyword(s):  
High Frequency ◽  
Limit Order Book ◽  
High Frequency Trading ◽  
Order Book ◽  
Limit Order
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