DOCSLIB.ORG

Securities Trading: Principles and Procedures Joel Hasbrouck

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Securities Trading: Principles and Procedures Joel Hasbrouck Securities Trading: Principles and Procedures Joel Hasbrouck Joel Hasbrouck is the Kenneth G. Langone Professor of Business Administration and Finance at the Stern School of Business, New York University. Correspondence: Department of Finance, Stern School NYU, 44 West 4th St., New York, NY 10012. Email: [email protected]. Web: http://pages.stern.nyu.edu/~jhasbrou. Disclosures: I have served as a consultant, instructor, and/or advisor board member for numer- ous private and public institutions. Copyright 2021, Joel Hasbrouck. All rights reserved. Version 12c; this draft: August 30, 2021. Major edits and editions since the prior draft (STPPms12b) are indicated by a solid line in the right magin. © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §1 p. 1 [Blank Page] © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §1 p. 2 i Preface This manuscript is a set of draft teaching notes for a one-semester course entitled Principles of Securities Trading. The target audience is finance students planning careers in trading, invest- ment management, or law, and information technology students who seeking to build trading and investment systems. The exposition draws on general economic principles, with an institu- tional focus on US equity markets. The high level of institutional content underscores the realism and currency of the mate- rial. Given the speed with which markets evolve, however, it is likely (maybe even certain) that some of the details are out of date. By way of full disclosure, I’ve taught (for compensation) in the training program of a firm that engages in high frequency trading. I’m presently associated with the US CFTC as an (un- compensated) “special government employee”. I’ve served on various government and industry advisory committees. I give presentations at financial institutions for which I sometimes receive honoraria. Although these notes draw from the subject generally known as market microstructure, they certainly don’t fully cover the field. There are many important areas of academic research that are barely touched upon: the econometrics of high-frequency data; measurement of liquid- ity; liquidity risk and commonality; liquidity and asset pricing; empirical analysis of price dis- covery; and so on. These omissions reflect the priority placed on simplifying the foundations of the subject, rather than discussing all the extensions. The text is organized in parts (broad themes), chapters and sections. • Part I starts with the basics. It introduces key terms and describes the important players. It explores the floor markets (pre-21st century) and their modern descend- ants, the continuous electronic limit order markets. • Part II considers extensions and alternatives to the limit order markets: auctions, dealers and dark trading mechanisms. • Part III examines informational efficiency. Many readers will have encountered the subject in an earlier finance class. They will have absorbed the idea that the market price of the stock incorporates and fully reflects the split, the takeover announce- ment, or whatever. The present approach discusses the trading processes that makes this incorporation possible. The role of trading procedure is particularly im- portant with respect to private information, which can give rise to bid-ask spread effects, price impacts, market failures and so forth. Part III also discusses some is- sues of practical and legal importance: securities class action lawsuits and insider trading regulation. • Part IV introduces algorithmic trading. The approach is incremental, moving from complex order types to statistical models and discussion of the order splitting prob- lem. • Part V covers current topics in regulation and high frequency trading. Passages that have been significantly changed since the previous draft (STPPms12b) are indi- cated by a line in the right margin. © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §2 p. 1 ii [Blank page] © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §2 p. 2 iii Table of Contents Part I. Modern securities markets: the basics .............................................. 1 Chapter 1. Introduction ............................................................................................................................................ 2 Chapter 2. The Elements of a Securities Market: US Equities .................................................................. 5 Chapter 3. Floor Markets ....................................................................................................................................... 15 Chapter 4. Limit order markets .......................................................................................................................... 21 Chapter 5. Multiple markets ................................................................................................................................. 39 Part II. Alternatives to Limit Order Markets ............................................... 48 Chapter 6. Auctions .................................................................................................................................................. 49 Chapter 7. Dealers in public limit-order markets ........................................................................................ 68 Chapter 8. Dark Markets ........................................................................................................................................ 78 Chapter 9. Dealer markets .................................................................................................................................... 84 Part III. Information and efficiency ................................................................ 96 Chapter 10. Public Information ........................................................................................................................... 97 Chapter 11. Securities Class Action Lawsuits............................................................................................. 112 Chapter 12. Private Information ...................................................................................................................... 125 Chapter 13. Insider Trading .............................................................................................................................. 139 Part IV. The Basics of Algorithmic Trading ............................................... 150 Chapter 14. Complex Orders ............................................................................................................................. 151 Chapter 15. Transaction Cost Analysis (TCA) ............................................................................................ 158 Chapter 16. Statistical Models of Order-Price Dynamics ...................................................................... 171 Chapter 17. Order Splitting ................................................................................................................................ 178 Part V. Special Topics ....................................................................................... 185 Chapter 18. Pricing, Fees, and Rebates ......................................................................................................... 186 Chapter 19. Reg NMS ............................................................................................................................................ 194 Chapter 20. High Frequency Trading (HFT) ............................................................................................... 203 © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §3 p. 3 iv [Blank Page] © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §3 p. 4 Part I. Modern securities markets: the basics Securities markets rely on highly structured trading procedures and well-defined institutional roles. Part I introduces these institutions and procedures. This part discusses, by way of back- ground, the floor markets. It then goes on to explore the descendants of these floors, our mod- ern limit order markets. © Joel Hasbrouck, 2021. STPPms12c.docx; 2021-08-30; Part I. Chapter 1. Introduction; §4 p. 1 Introduction 2 Chapter 1. Introduction We place strong demands on our securities markets. When we plan our investments or hedge risks, we rely on market prices to tell us the value of what we currently have and the cost of what we might attempt to do. We enter the markets to trade and implement our decisions. As events unfold over time, we return to the markets to monitor our progress and revise our deci- sions. Finally, when we want to consume the gains from our investments or the hedge is no longer needed, we sell or settle the securities. In basic economics, supply and demand are usually assumed to play out in an idealized per- fectly frictionless market. Each buyer and seller is assumed to be atomistic. That is, each individ- ual is small relative to the overall market. When acting alone, each is incapable of meaningfully influencing the price. Each trader willingly expresses her true preferences: when she is asked “How much would you buy if the price were x?,” for example, she answers honestly. (It does not occur to her to bluff or feign a weaker demand to obtain a lower price.) The buyers collectively define the demand curve (seeking to buy much at low prices, and little
Load more

Recommended publications
  • The Future of Computer Trading in Financial Markets an International Perspective
    The Future of Computer Trading in Financial Markets An International Perspective FINAL PROJECT REPORT This Report should be cited as: Foresight: The Future of Computer Trading in Financial Markets (2012) Final Project Report The Government Office for Science, London The Future of Computer Trading in Financial Markets An International Perspective This Report is intended for: Policy makers, legislators, regulators and a wide range of professionals and researchers whose interest relate to computer trading within financial markets. This Report focuses on computer trading from an international perspective, and is not limited to one particular market. Foreword Well functioning financial markets are vital for everyone. They support businesses and growth across the world. They provide important services for investors, from large pension funds to the smallest investors. And they can even affect the long-term security of entire countries. Financial markets are evolving ever faster through interacting forces such as globalisation, changes in geopolitics, competition, evolving regulation and demographic shifts. However, the development of new technology is arguably driving the fastest changes. Technological developments are undoubtedly fuelling many new products and services, and are contributing to the dynamism of financial markets. In particular, high frequency computer-based trading (HFT) has grown in recent years to represent about 30% of equity trading in the UK and possible over 60% in the USA. HFT has many proponents. Its roll-out is contributing to fundamental shifts in market structures being seen across the world and, in turn, these are significantly affecting the fortunes of many market participants. But the relentless rise of HFT and algorithmic trading (AT) has also attracted considerable controversy and opposition.
    [Show full text]
  • Evidence from the Toronto Stock Exchange
    The impact of trading floor closure on market efficiency: Evidence from the Toronto Stock Exchange Dennis Y. CHUNG Simon Fraser University and Karel HRAZDIL* Simon Fraser University This draft: July 1, 2013 For the 2013 Auckland Finance Meeting Abstract: We are the first to evaluate the impact of the trading floor closure on the corresponding efficiency of the stock price formation process on the Toronto Stock Exchange (TSX). Utilizing short-horizon return predictability as an inverse indicator of market efficiency, we demonstrate that while the switch to all electronic trading resulted in higher volume and lower trading costs, the information asymmetry among investors increased as more informed and uninformed traders entered the market. The TSX trading floor closure resulted in a significant decrease in informational efficiency, and it took about six years for efficiency to return to its pre-all-electronic-trading level. In multivariate setting, we provide evidence that changes in information asymmetry and increased losses to liquidity demanders due to adverse selection account for the largest variations in the deterioration of the aggregate level of informational efficiency. Our results suggest that electronic trading should complement, rather than replace, the exchange trading floor. JEL Codes: G10; G14 Keywords: Electronic trading; Trading floor; Market efficiency; Toronto Stock Exchange. * Corresponding author. Address of correspondence: Beedie School of Business, 8888 University Drive, Simon Fraser University, Burnaby, B.C., V5A 1S6, Canada; Phone: +1 778 782 6790; Fax: +1 778 782 4920; E-mail addresses: [email protected] (D.Y. Chung), [email protected] (K. Hrazdil). We acknowledge financial support from the CA Education Foundation of the Institute of Chartered Accountants of British Columbia and the Social Sciences and Humanities Research Council of Canada.
    [Show full text]
  • Appendix F. List of Questionnaires and Record Books, with Selected Facsimiles
    Appendix F. List of Questionnaires and Record Books, With Selected Facsimiles Page Page General Forms Census of Construction Industries NC-9901 Report of Organization ---------------------- 2 CC-1509 Building Construction—General NC-9926 Classification Report ------------------------ 5 Contractors and Operative Builders ----------------102 NC-9923 General Schedule --------------------------- 6 CC-1609 Heavy Construction Other Than Building Census of Retail Trade Construction—Contractors --------------------------106 CB-5202 Paint, Glass, Wallpaper --------------------- 8 CC-1729 Painting and Paper Hanging Special Trade Contractors ----------------------------------- 110 CB-5302 General Merchandise------------------------ 11 Census of Manufactures CB-5400 Food ------------------------------------------ 15 MA-1000(L) 1992 Annual Survey of Manufactures--- 114 CB-5504 Gasoline Service Stations------------------- 19 MC-2002 Meat Processing Plants--------------------- 118 Census of Wholesale Trade MC-2004 Dairy Products-------------------------------127 CB-5001 Short Form ----------------------------------- 23 Census of Mineral Industries CB-5012 Motor Vehicles ------------------------------- 25 MC-1001 Iron, Ferroalloy, Uranium, and CB-5013 Motor Vehicles Parts and Supplies --------- 29 Miscellaneous Metal Ores --------------------------138 CB-5099 Miscellaneous Durable Goods -------------- 33 MC-1301 Oil and Gas Field Operations --------------146 Census of Service Industries MC-1401 Stone, Sand, and Gravel -------------------153 CB-7001 Hotels
    [Show full text]
  • United States
    IMF Country Report No. 15/91 UNITED STATES FINANCIAL SECTOR ASSESSMENT PROGRAM April 2015 DETAILED ASSESSMENT OF IMPLEMENTATION ON THE IOSCO OBJECTIVES AND PRINCIPLES OF SECURITIES REGULATION This Detailed Assessment of Implementation on the IOSCO Objectives and Principles of Securities Regulation on the United States was prepared by a staff team of the International Monetary Fund. It is based on the information available at the time it was completed in March 2015. Copies of this report are available to the public from International Monetary Fund Publication Services 700 19th Street, N.W. Washington, D.C. 20431 Telephone: (202) 623-7430 Telefax: (202) 623-7201 E-mail: [email protected] Internet: http://www.imf.org Price: $18.00 a copy International Monetary Fund Washington, D.C. © 2015 International Monetary Fund UNITED STATES DETAILED ASSESSMENT OF March 2015 IMPLEMENTATION IOSCO OBJECTIVES AND PRINCIPLES OF SECURITIES REGULATION Prepared By This Detailed Assessment Report was prepared in the Monetary and Capital context of an IMF Financial Sector Assessment Markets Department Program (FSAP) mission in the United States during October-November 2014, led by Aditya Narain, IMF and overseen by the Monetary and Capital Markets Department, IMF. Further information on the FSAP program can be found at http://www.imf.org/external/np/fsap/fssa.aspx. UNITED STATES CONTENTS GLOSSARY _________________________________________________________________________________________ 3 EXECUTIVE SUMMARY ___________________________________________________________________________
    [Show full text]
  • Providing the Regulatory Framework for Fair, Efficient and Dynamic European Securities Markets
    ABOUT CEPS Founded in 1983, the Centre for European Policy Studies is an independent policy research institute dedicated to producing sound policy research leading to constructive solutions to the challenges fac- Competition, ing Europe today. Funding is obtained from membership fees, contributions from official institutions (European Commission, other international and multilateral institutions, and national bodies), foun- dation grants, project research, conferences fees and publication sales. GOALS •To achieve high standards of academic excellence and maintain unqualified independence. Fragmentation •To provide a forum for discussion among all stakeholders in the European policy process. •To build collaborative networks of researchers, policy-makers and business across the whole of Europe. •To disseminate our findings and views through a regular flow of publications and public events. ASSETS AND ACHIEVEMENTS • Complete independence to set its own priorities and freedom from any outside influence. and Transparency • Authoritative research by an international staff with a demonstrated capability to analyse policy ques- tions and anticipate trends well before they become topics of general public discussion. • Formation of seven different research networks, comprising some 140 research institutes from throughout Europe and beyond, to complement and consolidate our research expertise and to great- Providing the Regulatory Framework ly extend our reach in a wide range of areas from agricultural and security policy to climate change, justice and home affairs and economic analysis. • An extensive network of external collaborators, including some 35 senior associates with extensive working experience in EU affairs. for Fair, Efficient and Dynamic PROGRAMME STRUCTURE CEPS is a place where creative and authoritative specialists reflect and comment on the problems and European Securities Markets opportunities facing Europe today.
    [Show full text]
  • Metal Men Metal Men Marc Rich and the $10 Billion Scam A
    Metal Men Metal Men Marc Rich and the $10 Billion Scam A. Craig Copetas No part of this publication may be reproduced or transmitted in any form or by any means, electronic, or mechanical, including photocopy, recording, scanning or any information storage retrieval system, without explicit permission in writing from the Author. © Copyright 1985 by A. Craig Copetas First e-reads publication 1999 www.e-reads.com ISBN 0-7592-3859-6 for B.D. Don Erickson & Margaret Sagan Acknowledgments [ e - reads] Acknowledgments o those individual traders around the world who allowed me to con- duct deals under their supervision so that I could better grasp the trader’s life, I thank you for trusting me to handle your business Tactivities with discretion. Many of those traders who helped me most have no desire to be thanked. They were usually the most helpful. So thank you anyway. You know who you are. Among those both inside and outside the international commodity trad- ing profession who did help, my sincere gratitude goes to Robert Karl Manoff, Lee Mason, James Horwitz, Grainne James, Constance Sayre, Gerry Joe Goldstein, Christine Goldstein, David Noonan, Susan Faiola, Gary Redmore, Ellen Hume, Terry O’Neil, Calliope, Alan Flacks, Hank Fisher, Ernie Torriero, Gordon “Mr. Rhodium” Davidson, Steve Bronis, Jan Bronis, Steve Shipman, Henry Rothschild, David Tendler, John Leese, Dan Baum, Bert Rubin, Ernie Byle, Steven English and the Cobalt Cartel, Michael Buchter, Peter Marshall, Herve Kelecom, Misha, Mark Heutlinger, Bonnie Cutler, John and Galina Mariani, Bennie (Bollag) and his Jets, Fredy Haemmerli, Wil Oosterhout, Christopher Dark, Eddie de Werk, Hubert Hutton, Fred Schwartz, Ira Sloan, Frank Wolstencroft, Congressman James Santini, John Culkin, Urs Aeby, Lynn Grebstad, Intertech Resources, the Kaypro Corporation, Harper’s magazine, Cambridge Metals, Redco v Acknowledgments [ e - reads] Resources, the Swire Group, ITR International, Philipp Brothers, the Heavy Metal Kids, and .
    [Show full text]
  • Dark Pools and High Frequency Trading for Dummies
    Dark Pools & High Frequency Trading by Jay Vaananen Dark Pools & High Frequency Trading For Dummies® Published by: John Wiley & Sons, Ltd., The Atrium, Southern Gate, Chichester, www.wiley.com This edition first published 2015 © 2015 John Wiley & Sons, Ltd, Chichester, West Sussex. Registered office John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or trans- mitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher. Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com. Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor men- tioned in this book.
    [Show full text]
  • Informational Inequality: How High Frequency Traders Use Premier Access to Information to Prey on Institutional Investors
    INFORMATIONAL INEQUALITY: HOW HIGH FREQUENCY TRADERS USE PREMIER ACCESS TO INFORMATION TO PREY ON INSTITUTIONAL INVESTORS † JACOB ADRIAN ABSTRACT In recent months, Wall Street has been whipped into a frenzy following the March 31st release of Michael Lewis’ book “Flash Boys.” In the book, Lewis characterizes the stock market as being rigged, which has institutional investors and outside observers alike demanding some sort of SEC action. The vast majority of this criticism is aimed at high-frequency traders, who use complex computer algorithms to execute trades several times faster than the blink of an eye. One of the many complaints against high-frequency traders is over parasitic trading practices, such as front-running. Front-running, in the era of high-frequency trading, is best defined as using the knowledge of a large impending trade to take a favorable position in the market before that trade is executed. Put simply, these traders are able to jump in front of a trade before it can be completed. This Note explains how high-frequency traders are able to front- run trades using superior access to information, and examines several proposed SEC responses. INTRODUCTION If asked to envision what trading looks like on the New York Stock Exchange, most people who do not follow the U.S. securities market would likely picture a bunch of brokers standing around on the trading floor, yelling and waving pieces of paper in the air. Ten years ago they would have been absolutely right, but the stock market has undergone radical changes in the last decade. It has shifted from one dominated by manual trading at a physical location to a vast network of interconnected and automated trading systems.1 Technological advances that simplified how orders are generated, routed, and executed have fostered the changes in market † J.D.
    [Show full text]
  • Trading Around the Clock: Global Securities Markets and Information Technology
    Acronyms and Glossary Acronyms ACT —Automated Confirmation Transaction LIFFE —London International Financial Futures [System] (NASD) Exchange ADP —Automatic Data Processing, Inc. MATIF —Financial Futures Market (France) ADR —American Depository Receipt MOF —Ministry of Finance (Japan) AMEx —American Stock Exchange MONEP —Paris Options Market (France) BIS —Bank for International Settlement MOU —Memoranda of Understanding BOTCC —Board of Trade Clearing Corp. MSE —Midwest Stock Exchange CBOE -Chicago Board Options Exchange NASD —National Association of Securities Dealers CBOT —Chicago Board of Trade NASDAQ —NASD Automated Quotation system CCITT -Comite Consultatif International Nikkei 225 —Nikkei 225 futures contracts (Japan) Telegraphique et Telephon (International NSCC —National Stock Clearing Corp. Telecommunications Union) NYMEX —New York Mercantile Exchange —Commodity Exchange Act NYSE —New York Stock Exchange CEDEL —Centrale de Livraison de Valeurs OCC -Options Clearing Corp. (U.S.) Mobilieres OECD -Organization for Economic Cooperation CFTC —Commodity Futures Trading Commission and Development (U.S.) ONA -Open network architecture (of computer CME -Chicago Mercantile Exchange systems) CNs -Continuous Net Settlement OSE -Osaka Stock Exchange (Japan) DTC —Depository Trust Corp. OSF50 -Osaka Securities Exchange Stock Futures DVP -delivery-versus-payment (Japan) EC —European [Economic] Community OTC -Over-the-counter FIBv —Federation International des Bourses de PHLX —Philadelphia Stock Exchange Valeurs PSE —Pacific Stock Exchange —Federal
    [Show full text]
  • Tempest in a Teapot: Michael Lewis' Flash Boys Solve a Problem That Is Ba
    Tempest in a Teapot: Michael Lewis’ Flash Boys Solve a Problem that is Barely There By Laurence B. Siegel April 29, 2014 Michael Lewis is the finest writer in a generation to turn his attention to the practice of finance, but in Flash Boys: A Wall Street Revolt — his account of high-frequency trading (HFT) and of a likeable trader who found a way to beat it — he is a few steps off base. Flash Boys is a terrific read, with dashing heroes and dastardly villains. But life isn’t like that, and HFT is neither good nor evil. It’s a new way of profiting froM the trading activity of buyers and sellers of equities. It either raises or lowers total transaction costs by a sMall amount, but we have no way of knowing which. Lewis is convinced that HFT is evil and needs to be stopped. In contrast, I believe in evaluating business practices using data about their costs, benefits and unintended consequences and letting those practices be unless they are clearly dishonest and harMful. Applying those criteria to HFT, I aM not convinced of its harM. Of course, it is entirely proper that we should look for ways to trade against HFT and keep soMe of the profit for our clients and for ourselves. That is exactly what Brad KatsuyaMa, Lewis’ hero, did, and he should be coMMended for his work. Flash Boys did teach me a lot about modern market institutions, which are so new and coMplex that Most people don’t understand theM at all.
    [Show full text]
  • Mr. Brad Katsuyama
    Testimony of Investors Exchange Chief Executive Officer Bradley Katsuyama Before the U.S. House of Representatives Committee on Financial Services Subcommittee on Capital Markets, Securities, and Investment June 27, 2017 Introduction Chairman Huizenga, Ranking Member Maloney and members of the Subcommittee, my name is Brad Katsuyama and I am the CEO of IEX Group, Inc. and Investors Exchange LLC, more commonly known as “IEX”. I appreciate the opportunity to offer this testimony and also appreciate your willingness to provide a forum to consider ways to strengthen the U.S. equity markets. The U.S. equity markets constitute a critical national asset. They provide a vital source of capital for companies, large and small, and they provide the chance for millions of ordinary Americans to help fund and participate in the benefits of economic growth. From my perspective, the question we should always consider is whether the markets are primarily focused on serving the interests of investors and public companies, and the value of any agenda items should be determined based on whether they advance or detract from this primary focus. If the equity markets are not adequately serving these constituents and advancing the principles of fairness, transparency, and trust, then action must be taken to re-focus the markets on these tenets. Technology has been the largest driver of change in the equity markets over the past two decades, as I will detail later. As trading has become highly electronic, technology has delivered a variety of efficiencies and
    [Show full text]
  • Using the Market to Manage Proprietary Algorithmic Trading HOLLY A
    Source: Hester Peirce and Benjamin Klutsey, eds., Reframing Financial Regulation: Enhancing Stability and Protecting Consumers. Arlington, VA: Mercatus Center at George Mason University, 2016. CHAPTER 10 Using the Market to Manage Proprietary Algorithmic Trading HOLLY A. BELL University of Alaska Anchorage ven before Michael Lewis1 published his popu lar and controver- sial2 book on high- frequency trading (HFT), traditional traders and regulators wer e asking what they should do about this new evolution Ein financial market trading technology in which traders use algorithms— computerized trading programs—to automatically trade securities in finan- cial markets. But what exactly about high- frequency trading do traders and regulators wish to see controlled, and can th ese issues be regulated away? Or are there better, more market- based solutions to address the issues associated with evolving market technology? The intent of this chapter is to broadly discuss categories of concerns about algorithmic and, more specifically, proprietary algorithmic trading based on issues regulators and legislators themselves have given as rationale for market intervention, but not to explore in detail every pos si ble issue that might be raised. The chapter defines algorithmic and proprietary trading and describes how the technology and regulatory environments have gotten us to to day’s financial market structure. I pres ent some of the broad concerns algorithmic trading technologies have created for regulators, legislators, the public, and other stakeholders,
    [Show full text]