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BE653 Disruption in the markets 2016 David Norman

BE653 Disruption in the markets 2016 David Norman. How has technology disrupted markets?. Market infrastructure design Exchanges, ECN’s and MTF’s Traders and Market makers High Frequency trading (HFT) and Dark Pools Neuroscience and Human-machine Interaction (HCI).

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BE653 Disruption in the markets 2016 David Norman

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  1. BE653Disruption in the markets 2016David Norman

  2. How has technology disrupted markets? • Market infrastructure design • Exchanges, ECN’s and MTF’s • Traders and Market makers • High Frequency trading (HFT) and Dark Pools • Neuroscience and Human-machine Interaction (HCI)

  3. A Timeline in the development of markets • 1986/1987 – London ‘Big Bang’ + Crash • 1990- Central Limit Order Book • 1997 - Regulation ATS • 1999 - LIFFE closed • 2000 - ISE and ICE –New York and Atlanta • 2002 - High Frequency Traders and Market Makers • 2005 - Regulation NMS and SEC Rule 610 • 2006 - Dark Pools and Crossing Networks • 2007 - HFT’s on Steroids • 2009 - Banking scandals – LIBOR, etc • 2010 - May 6th Flash Crash • 2012 – August 1st Knight Trading loses $440 Million • 2013- Jan 3rd 2013 • 2015 - Regulators Bite -Ban Cancelled Orders

  4. Where it all began -1986 LSE

  5. The FTSE PIT 1990

  6. Order Execution - First in First Out • FIFO definition • Central Limit Order Book • Scalping • Locked Markets and backwardations

  7. The Central Limit Order Book

  8. The Arena

  9. Dark Pools, Crossing Networks and Systematic Internalizers • By 2012 the US Equity Market ‘Arena’ had 13 exchanges and 50 Alternative Trading Venues • REG NMS tried to link the system together • Chaotic with system Outages

  10. Market Outage Jan 3rd 2013 NASDAQ

  11. Inherent Volatility

  12. Paralysis by Analysis

  13. Can we restore a sense of Normality? • Who do the markets serve? • Who benefit most from the markets? • What are the ethical considerations? • Where does the human trader fit in?

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