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Activity Number: 426 - Contributed Poster Presentations:Business and Economic Statistics Section
Type: Contributed
Date/Time: Tuesday, July 31, 2018 : 2:00 PM to 3:50 PM
Sponsor: Business and Economic Statistics Section
Abstract #330267
Title: Automated Trading and Market Liquidity
Author(s): Neda Arzandeh* and Julieta Frank
Companies: University of Manitoba and University of Manitoba
Keywords: agricultural commodities; futures markets; limit order book; algorithmic trading

Traders in futures markets operate by submitting limit buy or sell orders to the exchange, where a centralized computer system places them in the limit order book (LOB). Incoming orders updating the LOB can be generated by a computer algorithm or by a human trader. Algorithmic orders are generally used to trade large quantities gradually over time with the objective of minimizing market impact and trading costs. Such orders can access the market at a speed and frequency that would be impossible for a human trader to perform. However, the impact of algorithmic orders on market quality has been little explored. We analyze the role of algorithmic trading on market quality focusing on market liquidity. Specifically, we examine agricultural futures markets. Studies on algorithmic trading are scarce, mainly due to the unavailability of data identifying the orders that were generated by an algorithm. To the best of our knowledge no research has been performed in algorithmic trading for agricultural commodities.

Authors who are presenting talks have a * after their name.

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