Global capital markets have undergone fundamental transformations in recent years and, as a result, have become extraordinarily complex and opaque. Trading space is no longer measured in minutes or seconds but in time units beyond human perception: milliseconds, microseconds, and even nanoseconds. Technological advances have thus scaled up imperceptible and previously irrelevant time differences into operationally manageable and enormously profitable business opportunities for those with the proper high-tech trading tools. These tools include the fastest private communication and trading lines, the most powerful computers and sophisticated algorithms capable of speedily analysing incoming news and trading data and determining optimal trading strategies in microseconds, as well as the possession of gigantic collections of historic and real-time market data.
Fragmented capital markets are also becoming a rapidly growing reality in Europe and Asia, and are an established feature of U.S. trading. This raises urgent market governance issues that have largely been overlooked. Global Algorithmic Capital Markets seeks to understand how recent market transformations are affecting core public policy objectives such as investor protection and reduction of systemic risk, as well as fairness, efficiency, and transparency.
The operation and health of capital markets affect all of us and have profound implications for equality and justice in society. This unique set of chapters by leading scholars, industry insiders, and regulators discusses ways to strengthen market governance for the benefit of society at whole.
1: Walter Mattli: Introduction: A New Capital Market Reality and Overview
Part I: High frequency trading: key topics
2: Thierry Foucault and Sophie Moinas: Is trading fast dangerous?
3: Haim Bodek: A case sturdy in regulatory arbitrage and information asymmetry: high frequency trading the post only intermarket sweep order
4: Dan Marcus and Miles Kellerman: The FX race to zero: electronification and market structural issues in foreign exchange trading
Part II: Market quality and best order execution
5: Elaine Wah, Stan Feldman, Francis Chung, Allison Bishop, and Daniel Aisen: A comparison of execution quality across U.S. stock exchanges
6: Robert Battalio: What has changed in four years? Are retail broker routing decisions in 4Q2016 consistent with the pursuit of best execution
7: Tyler Gellasch and Chris Nagy: Better 'best execution': an overview and assessment
Part III: Analytical and regulatory frameworks
8: Merritt Fox, Lawrence Glosten, and Gabriel Rauterberg: Naked open market manipulation and its effects
9: Yesha Yadav: Algorithmic trading and market manipulation
10: Stanislav Dolgopolov: Legal liability for fraud in the evolving architecture of securities markets
Part IV: Regulatory agencies and market structure regulation
11: Greg Medcraft: Regulating high-frequency trading and dark liquidity in Australia
12: Steffen Kern and Giuseppe Loiacono: High-frequency trading and circuit breakers in the EU- recent findings and regulatory activity
13: Timothy Baikie, Tracey Stern, Susan Greenglass, and Maureen Jensen: A framework for responsive market regulation
