Automated trading in London
Welcome to InKings! This post is a quick shout to our work on automated trading systems and automated mechanism design.
A few weeks ago I gave an invited talk on competition between financial markets to a conference on Algorithmic Trading held in London. The conference was jointly organized by the Financial Computing Centre of University College London and LMAX, an innovative online financial trading marketplace. I spoke mainly about the CAT Market Design Tournament, an international research tournament established in 2007 to encourage research into the design of adaptive and automated market mechanisms. With the rapid recent growth of online financial trading, electronic marketplaces have proliferated, some under the labels “alternative trading platforms,” “upstairs markets,” or “dark pools of liquidity” (since many of these markets permit anonymous trades).
Competition between traditional stock exchanges and these alternative venues has intensified, and the need for adaptive responses by online markets to dynamic competitive conditions has therefore increased. The CAT Tournament has sought, through crowd-sourced research, to provide the theoretical and deployment underpinnings for the development of the science of automated and adaptive marketplace design. The tournament has been run successfully four times since 2007, under the aegis of the Trading Agent Competition, and has attracted entrants from every continent. The Tournament was undertaken as part of a major research project funded by the EPSRC, undertaken between the Universities of Birminghan, Liverpool and Southampton, with the involvement of Brooklyn College New York. A special issue of the academic journal, E-Commerce Research and Applications, devoted to reseach arising from the CAT Tournament, is due to appear in 2012.
The UCL/LMAX conference on Algorithmic Trading was very successful, and speakers pointed to the opportunities and risks arising from the deployment of sophisticated computing technology in economic and financial domains. Event co-sponsor LMAX is a newly-established multilateral online financial trading marketplace, created with a goal of enabling retail financial traders to undertake automated software trading through an open API. Videos of the talks can be found here (you will first have to register with LMAX). I recommend watching the talk by Dave Cliff of Bristol University, who summarizes compellingly the current lack of understanding we have of the workings of automated trading systems: we may be sitting at the confluence of four centuries of macro-economic crises and two centuries of technological disasters.