Market Microstructure in Practice

Market Microstructure in Practice

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Market Microstructure in Practice comments on the consequences of Reg NMS and MiFID on market microstructure. It covers changes in market design, electronic trading, and investor and trader behaviors. The emergence of high frequency trading and critical events like the a€œFlash Crasha€ of 2010 are also analyzed in depth. Edited by Charles-Albert Lehalle and Sophie Laruelle, and with contributions from Romain Burgot, StAcphanie Pelin and Matthieu Lasnier, this book uses a quantitative viewpoint to help students, academics, regulators, policy makers, and practitioners understand how an attrition of liquidity and regulatory changes can impact the whole microstructure of financial markets. A mathematical Appendix details the quantitative tools and indicators used throughout the book, allowing the reader to go further on his own. Contents:Monitoring the Fragmentation at Any Scale:Fluctuations of Market Shares: A First GraphSmart Order Routing (SOR), A Structural Component of European Price Formation ProcessStill Looking for the Optimal Tick SizeCan We See in the Dark?Understanding the Stakes and the Roots of Fragmentation:From Intraday Market Share to Volume Curves: Some Stationarity IssuesDoes More Liquidity Guarantee a Better Market Share? A Little Story About the European Bid-Ask SpreadThe Agenda of High Frequency Traders: How Do They Extend Their Universe?The Link Between Fragmentation and Systemic RiskOptimal Organisations for Optimal Trading:Organising a Trading Structure to Answer to a Fragmented LandscapeMarket Impact Measurements: Understanding the Price Formation Process from the Viewpoint of One InvestorOptimal Trading Methods Readership: Students, academics, researchers, finance professionals, regulators and policy makers interested in public markets, exchange and securities. Keywords:Market Microstructure;Finance;Financial Markets;Regulation;MiFID;Reg NMS;ESMAKey Features:Interdisciplinary comments on market microstructure (covering economy, quantitative finance, and econophysics)Covers a very large spectrum of phenomenon: high frequency trading, liquidity monitoring, the Flash Crash, systemic risk, fragmentation, Smart Order Routing, trade scheduling and optimal tradingThe contributors are recognized by academia, regulators and practitionersReviews: a€œLehalle and Laruelle bring [their] experience to bear on every aspect of the discussion, as well as deep quantitative understanding. The resulting book is a unique mixture of real market knowledge and theoretical explanation. There is nothing else out there like it, and this book will be a central resource for many different market participants.a€Robert Almgren President and Cofounder of Quantitative Brokers, New York a€œCharles' and Sophie's book on markets microstructure will improve our knowledge and consequently help us to tweak these potentiometers. In promoting better education, this book is at the roots of restoring trust in the markets.a€ Philippe Guillot Executive Director, Markets Directorate AutoritAc des marchAcs financiers (AMF), Paris a€œThis book provides a perspective on today's markets. It reviews institutional changes, discusses them, and provides color through real-world examples.a€ Albert J Menkveld Professor of Finance at VU University Amsterdam a Research Fellow at TI-Duisenberg School of Finance a€œToday, there is so much confusion on the actual functioning of capital markets, the impact of regulation, MiFiD in Europe and Reg NMS in the US, on market fragmentation and liquidity, the role of dark pools, of high-frequency traders in providing liquidity and bridging fragmented trading platforms. This book addresses all these demanding issues in a readable form. The authors are uniquely qualified, combining scholarly research backgrounds at the highest level of sophistication with extensive practical experience in designing best practice trading platforms. This book is a must-read for anyone with a serious interest in market microstructure.a€ Michel Crouhy Head of Research a Development at Natixis, Paris a€œMarket Microstructure in Practice a€” the title of this book reflects perfectly the intentions of the authors. Many academics treat market structure as if they are watching a football game a€” from the outside, commenting each player's actions and the consequences a€b missing the key operational points and leaving to management the final step between concepts and reality. For once we have here a detailed analysis of what a€˜market microstructurea€™ means in practice for a manager willing to understand the business impact of fragmentation. Through detailed definitions and clarifications of the different roles of participants in the markets (lit as well as dark), the authors help the reader to navigate the complexity of European financial markets. The authors also provide their views about optimal organizations for a true a€˜Best Executiona€™. From an Exchange perspective, the book provides much useful information about the flip side of the coin; I mean here the fragmentation seen from the intermediaries' side. Usually managers of Exchanges and Trading venues view fragmentation ONLY as a threat and not as an issue faced by their customers, for whom they could provide solutions to make their markets efficient in the race for market share. In this respect, it is an invaluable tool for whoever is willing to embrace competition and see these tremendous changes in the landscape as an opportunity.a€ Roland Bellegarde Group Executive Vice President a Head of European Execution NYSE Euronext, Paris... 51, 256 Gini index measuring discrepancies, 145 Hawkes Process, 271 HFT ( High Frequency Trader), 144, 149 High Frequency Market Makers, 37, 224 Implementation Shortfall, 210 Kolmogorov-Smirnov Test, 258 Latency, 64, 214, 289 Linear ... 96, 287 Lit pool, 288 LOB (Limit Order Book), 290 Log-Linear Regression, 53 Market Data, 187 Market Depth, 290 Market Impact, 24, 29, 41, 56 , 68, 195, 246, anbsp;...

Title:Market Microstructure in Practice
Author: Charles-Albert Lehalle, Sophie Laruelle
Publisher:World Scientific - 2013-11-05

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