Robert Almgren (Quantitative Brokers): TBD
Hanna Assayag (HSBC): TBD
Markus Baldauf (UBC): TBD
Neil Chriss (Paloma Partners): TBD
Robert Graumans (AFM and University of Oxford): Anonymity, Signaling, and Collusion in Limit Order Books
Anonymity is a fundamental design feature of many limit order books. Yet, by analyzing data that includes trader identifiers, we show that market makers actively undermine this anonymity. They do so by placing large-volume limit orders, effectively signaling their presence to other market makers. In addition, they hardly trade with one another and strategically target— or "snipe"—retail limit orders.
To explain this behavior, we develop a model that incorporates both competitive and collusive market equilibria. The model shows that market makers’ actions align with a collusive equilibrium, where signaling is used to prevent mutual sniping. This signaling mechanism allows market makers to coordinate and share the order flow from retail traders, while simultaneously suppressing competition from those same retail orders. As a result, market makers attract additional benign flow from impatient investors who might otherwise have executed trades against retail limit orders.
Björn Hagströmer (Stockholm Business School): Why are European Equities so Illiquid?
Kiyoshi Kanazawa (Kyoto University): TBD
Stefan Schlamp (Deutsche Börse): HFT State of Play
Old-school HFT just meant servers collocated with the exchange. Then came dedicated fiber optic connections between trading venues (e.g. the “Spread Line” between Chicago and New York) which were soon replaced by series of microwave towers. The latest development is the use of short-wave radio transmitters to send signals across the Atlantic and Pacific.
Within the collocated servers, SolarFlare network cards with kernel bypass became a condition sine qua non which were soon made obsolete by FPGAs. These allowed reaction times to events of less than 100 nanoseconds employing rule-based methodologies. The current state of the art uses ASICs and exploits the subtle details of the data transmission protocols to yield wire-to-wire reaction times in the low single-digit nanosecond range!
The talk will go over some of these developments, their impact on non-HFT participants, their prevalence and fingerprints in the market data, and how exchanges can/do/should respond.
Justin Sirignano (University of Oxford): TBD
Almut Veraart (Imperial College London): TBD
Dario Villamaina (Capital Fund Management): Self-Inflated Funds
When funds with illiquid portfolios grow rapidly without rebalancing into more liquid assets, they generate self-inflated returns via their own price impact. Investors chase these returns, triggering a positive feedback loop that inflates both fund size and asset prices.
We introduce a simple measure - fund illiquidity - that captures a fund’s potential for return inflation. Using daily ETF data, we estimate price impact, decompose returns, and show that investors chase both fundamental and self-inflated returns. We find that inflated funds underperform in the long run and that stock-level ownership by inflated funds predicts negative long-term returns.
Ji Hee Yoon (University College London): TBD