Do Investors Save When Market Makers Pay? Retail Execution Costs Under Payment for Order Flow Models

Regulations and Technology Behind HFT Latency, Batch Auctions and Payments for Order Flow in the US and EU

e-Finanse ◽

10.2478/fiqf-2018-0010 ◽

2018 ◽

Vol 14 (2) ◽

pp. 34-46

Author(s):

Carlos Jorge Lenczewski Martins

Keyword(s):

High Frequency ◽

Great Part ◽

High Frequency Trading ◽

Order Flow ◽

Electronic Trading ◽

Inside Information ◽

Wholesale Market ◽

Market Makers ◽

The Us ◽

Clock Synchronisation

AbstractSince the appearance of high-frequency trading in the 1990s, speed has become one of the key issues in trading and with it, the controversy around High-Frequency Trading. In recent years, there have been many discussions and analyses of how high-frequency trading may affect the financial market – but still without any clear conclusions. Leaving these opinions behind, many adjustments have already been made in the US and Europe - both to regulations and market rules, impacting not only High-Frequency Trading but general electronic trading as well. These rules and regulations are the result of technological developments in electronic trading and more specifically, High-Frequency Trading and the practice of Payments for Order Flow. The question remains as to how deep regulations should go, especially in the case of HFT which can be severely affected by harsh regulatory requirements or procedures. Because two of the most important issues in HFT are time and information, some of the rules and regulations affect aspects such as not only what type of information and how it should be gathered, but also clock synchronisation and time-stamp granularity. Another issue that may be considered controversial in the field of HFT (although it is not a practice limited to HFT) is Payment For Order Flows. Under this mechanism, wholesale market makers pay brokers for their client’s order flow – a practice that performed in great amounts and at high speeds may give a considerable level of “inside” information. Regulations, especially from ESMA (MiFID II). try in great part to thus mitigate the practice of Payments For Order Flows.The aim of this paper is to present technological advancements in the field of trading communications used, not only by HFT firms, but also by exchanges. Additionally, the objective is to underline some challenges regarding regulatory changes that try to adapt to the current level of technology – for example, those related to clock synchronisation and data processing. One last issue brought forward is the possibility of converting markets from continuous-time auctions to discrete-time auctions - a concept that is aimed at liquidating the speed advantage and competition only to price level and hence, eliminating HFT advantages.

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Macroeconomic News and Exchange Rates: Exploring the Role of Order Flow

Global Journal of Emerging Market Economies ◽

10.1177/09749101211040146 ◽

2021 ◽

pp. 097491012110401

Author(s):

Munazza Jabeen ◽

Abdul Rashid

Keyword(s):

Exchange Rates ◽

Private Information ◽

Foreign Exchange Market ◽

Order Flow ◽

Time Data ◽

Macroeconomic News ◽

Public And Private ◽

Market Makers ◽

News Announcements

This article studies the effects of macroeconomic news announcements and order flow on exchange rates in Pakistan by considering both direct and indirect information channels during news announcements periods. For this purpose, it employs GARCH models by using real-time data on macroeconomic news, order flow, and exchange rates. The findings reveal that macroeconomic news directly, and indirectly affect Pak Rupee exchange rates. The results also show that the order flow drives fluctuations in Pak Rupee exchange rates indicating the role of trade signals and trading strategies of currency traders in the exchange rate determination. Hence, as part of an aggregated economic component and means of public and private information, macroeconomic news and order flow impact Pak Rupee exchange rates as an integrated determinant. When macroeconomic news strikes the foreign exchange market, it affects the decisions of market makers, influencing order flow, and then exchange rates.

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Avalanche Stratification - Experimental Tests of the “Metastable Wedge” and “Continuous Flow” Models

MRS Proceedings ◽

10.1557/proc-627-bb2.6 ◽

2000 ◽

Vol 627 ◽

Author(s):

M. E. Swanson ◽

M. Landreman ◽

J. Michel ◽

J. Kakalios

Keyword(s):

Continuous Flow ◽

Granular Media ◽

Experimental Tests ◽

Coarse Sand ◽

Angle Of Repose ◽

Flow Models ◽

Maximum Angle ◽

Stratification Effect ◽

Upward Moving ◽

Moving Layer

ABSTRACTWhen an initially homogeneous binary mixture of granular media such as fine and coarse sand is poured near the closed edge of a “quasi-two-dimensional” Hele-Shaw cell consisting of two vertical transparent plates held a narrow distance apart, the mixture spontaneously forms alternating segregated layers. Experimental measurements of this stratification effect are reported in order to determine which model, one which suggests that segregation only occurs when the granular material contained within a metastable heap between the critical and maximum angle of repose avalanches down the free surface, or one for which the segregation results from smaller particles becoming trapped in the top surface and being removed from the moving layer during continuous flow. The result reported here indicate that the Metastable Wedge model provides a natural explanation for the initial mixed zone which precedes the formation of the layers, while the Continuous Flow model explains the observed upward moving kink of segregated material for higher granular flux rates, and that both mechansims are necessary in order to understand the observed pairing of segregated layersfor intermediate flow rates and cell separations.

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