Collaborative Research: The Negative Effects of High Frequency Trading and Transparency in Dynamic Markets

该奖项资助了信息不对称条件下动态市场设计的研究。设计师拥有的工具是有限的，一旦设计确立，市场就会成为一个竞争市场。该项目的目标是确定对市场交易时间的限制或对市场买卖报价的透明度的强制规定如何影响市场结果和市场交易的整体效率。该项目有四个不同的组成部分。第一个是比较不同设计的市场结果的效率，这些设计在市场开放交易的频率方面是不同的。例如，该团队比较了两种市场的结果，一种是买家连续出价，另一种是在第一次出价之后有一个禁售期，在此期间不能进行任何交易。研究建立了这种贸易限制改善市场整体功能的条件。第二个部分考虑了动态市场中过去报价透明度的利弊。研究表明，当过去被拒绝的报价是公开信息时，市场均衡是非常不同的。透明度越低，贸易效率越高。第三部分考虑了动态逆向选择市场中可能的政府干预。结果表明，定期拍卖和补贴部分初始交易的政策可以提高市场效率。最后一个部分考虑了市场之间的竞争。这项研究提供了更广泛的影响，揭示了高频交易、订单流透明度和金融市场中某些市场机构的后果。研究结果将有助于评估政府政策，从金融市场监管和市场之间的竞争，到通过购买所谓“冻结”市场中的资产来直接干预，以重建流动性。

This award funds research on the design of dynamic markets under conditions of asymmetric information. The designer has a limited set of instruments, and once the design is established the market operates as a competitive market. The goal of the project is to determine how restrictions on the timing of market transactions or mandating transparency about market buy and sell offers affect market outcomes and the overall efficiency of trade in the market.The project has four distinct components. The first compares efficiency of market outcomes for different designs that differ in terms of how frequently the market is open for trades. For example, the team compares outcomes in markets in which buyers make continuous offers to outcomes in markets where after the first offer there is a lock-up period during which no trades can be made. The research establishes conditions under which this kind of trade restriction improves the overall functioning of the market. The second component considers the pros and cons of transparency of past offers in dynamic markets. The research demonstrates that market equilibria are very different when past rejected offers are public information. Less transparency results in more efficient trade. The third component considers possible government interventions in markets with dynamic adverse selection. The results suggest that a policy of holding periodic auctions and subsidizing some initial trades can improve market efficiency. The final component considers competition between marketplaces.The research provides broader impact by shedding new light on the consequences of high-frequency trading, transparency of order flows and certain market institutions found in financial markets. The results will be useful for evaluation of government policy, from regulation of financial markets and competition between marketplaces to a direct intervention by purchases of assets in so called 'frozen' markets to re-establish liquidity.