The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response

Eric Budish, Peter Cramton, John Shim · 2015 · The Quarterly Journal of Economics

IntermediateHFTEmpiricalFree to read

The ES-SPY correlation breaks down at millisecond horizons, creating mechanical sniping profits. Proposes frequent batch auctions as the fix.

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At a glance

Level: Intermediate: Comfortable with statistics, regressions and basic probability models
Horizon: HFT
Data needed: L1 quotes Set what data you have
Themes: HFT & market design
Assets: Index futures, Equities
Market: US

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HFT, speed and market design

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Cite

@article{budish2015high,
  author = {Budish, Eric and Cramton, Peter and Shim, John},
  title = {{The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response}},
  journal = {The Quarterly Journal of Economics},
  year = {2015},
  doi = {10.1093/qje/qjv027}
}

Budish, E., Cramton, P., & Shim, J. (2015). The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response. The Quarterly Journal of Economics. https://doi.org/10.1093/qje/qjv027