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BE653 Disruption in the markets 2016 David Norman

Explore how technology has revolutionized financial markets, from HFT to Dark Pools, and the role of human traders. Follow a timeline of market milestones, regulatory changes, and ethical considerations in market design and interactions.

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BE653 Disruption in the markets 2016 David Norman

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  1. BE653Disruption in the markets 2016David Norman

  2. How has technology disrupted markets? • Market infrastructure design • Exchanges, ECN’s and MTF’s • Traders and Market makers • High Frequency trading (HFT) and Dark Pools • Neuroscience and Human-machine Interaction (HCI)

  3. A Timeline in the development of markets • 1986/1987 – London ‘Big Bang’ + Crash • 1990- Central Limit Order Book • 1997 - Regulation ATS • 1999 - LIFFE closed • 2000 - ISE and ICE –New York and Atlanta • 2002 - High Frequency Traders and Market Makers • 2005 - Regulation NMS and SEC Rule 610 • 2006 - Dark Pools and Crossing Networks • 2007 - HFT’s on Steroids • 2009 - Banking scandals – LIBOR, etc • 2010 - May 6th Flash Crash • 2012 – August 1st Knight Trading loses $440 Million • 2013- Jan 3rd 2013 • 2015 - Regulators Bite -Ban Cancelled Orders

  4. Where it all began -1986 LSE

  5. The FTSE PIT 1990

  6. Order Execution - First in First Out • FIFO definition • Central Limit Order Book • Scalping • Locked Markets and backwardations

  7. The Central Limit Order Book

  8. The Arena

  9. Dark Pools, Crossing Networks and Systematic Internalizers • By 2012 the US Equity Market ‘Arena’ had 13 exchanges and 50 Alternative Trading Venues • REG NMS tried to link the system together • Chaotic with system Outages

  10. Market Outage Jan 3rd 2013 NASDAQ

  11. Inherent Volatility

  12. Paralysis by Analysis

  13. Can we restore a sense of Normality? • Who do the markets serve? • Who benefit most from the markets? • What are the ethical considerations? • Where does the human trader fit in?

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