Insights on the Statistics and Market Behavior of Frequent Batch Auctions

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Abstract

This paper extends previous research performed with the SHIFT financial market simulation platform. In our previous work, we show how this order-driven, distributed asynchronous, and multi-asset simulated environment is capable of reproducing known stylized facts of real continuous double auction financial markets. Using the platform, we study a pricing mechanism based on frequent batch auctions (FBA) proposed by a group of researchers from University of Chicago. We demonstrate our simulator’s capability as an environment to experiment with potential rule changes. We present the first side-by-side comparison of frequent batch auctions with a continuous double auction. We show that FBA is superior in terms of market quality measures but we also discover a potential problem in the technical implementation of FBA.

Original languageEnglish
Article number1223
JournalMathematics
Volume11
Issue number5
DOIs
StatePublished - Mar 2023

Keywords

  • continuous double auctions
  • financial engineering
  • frequent batch auctions
  • high-frequency trading
  • market microstructure

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