On propose une perspective originale d'analyser les différents flux hautes fréquences d'information provenant des marchés financiers et fournit des modèles simples et intuitives qui reflètent étroitement la réalité. On observe les données empiriques et note certains faits stylisés et propose des modèles pour capturer ces faits. Dans le chapitre 1, on passe en revue les définitions et propriétés de base des marchés électroniques. En particulier, on revoit les travaux de microstructure et de modélisation du marché, et leurs relations à ce travail. On introduit la taille du "tick", qu'on utilise pour classifier les actifs et interpréter les différents résultats. Dans le chapitre 2, on montre empiriquement que l'impact d'une seule transaction dépend de la durée inter-transactions. En effet, lorsque le taux des échanges devient plus rapide, la variance des rendements des transactions augmente fortement et que ce comportement persiste à des échelles de temps plus grossières. On montre également que la valeur du spread augmente avec l'activité et on en déduit que les carnets d'ordres sont plus vide lorsque le taux des échanges est élevé. Dans le chapitre 3, on présente un modèle pour capturer le bruit de microstructure. Les prix des actifs sont représentés par la somme des rendements "tick" arrivant à des temps de Poisson aléatoires. Le modèle se compose d'une martingale diffusive contaminée par un bruit autocorrélé mais disparaissant aux échelles grossières. On est capable de capturer la signature de la variance et l'autocorrélation faible mais significative des rendements "tick". Dans le chapitre 4, on utilise les processus ponctuels de Hawkes pour modéliser l'arrivée aléatoire des transactions. On modélise la transformation échelle fine - échelle grossière des prix et en particulier l'effet sur les moments des rendements des prix. On propose une technique simple d'estimation non paramétrique de la structure de dépendance des processus de Hawkes dans le cas unidimensionnel et dans quelques cas particuliers multidimensionnels. On applique la méthode à des actifs de Future et trouve des noyaux de dépendance en loi de puissance.

Over the last decade, researchers have attempted to show how efficient the markets are by using Fama’s Efficiency Market Hypothesis (EMH). The theory states that an investor cannot increase his returns without taking additional risk. The markets can be efficient in different forms depending on the information included in the traded asset. It is quoted that: "There ain't no such thing as a free lunch". However, the topic still remains disputable since researchers have introduced controversial findings after investigating different markets. Overall, emerging markets have been characterized with higher volatility which consequently declares for market imperfections. Commonly, these market inefficiencies are quickly captured by the eye of the investors who are lurking for potential benefits through exploiting them. These are the so called arbitrage opportunities which exist on different level of impact, depending on the attitude of the market. The existence of arbitrage is clear evidence against Fama’s theory and it has been documented in numerous studies. Unfortunately those events occur rarely and disappear in a matter of seconds, thus; is highly competitive to capitalize. Over the last decade high frequency trading (HFT) became popular on different markets and it allowed traders to make decisions and execute transactions in a matter of milliseconds using algorithms. The market we are interested in is the Forex market which is a decentralized market where currencies from all over the world are traded. Main participants include multinational banks which rely heavily on HFT. The method used to benefit from inefficiency is called triangular arbitrage and it involves selling and buying 3 sets of currency pairs in times when a parity is violated. The goal of this study is to answer the following research question, “Is there a difference in triangular arbitrage opportunities between emerging markets and developed ones?” The main objective of this research is to examine how the number of arbitrage occurrences varies considering different market characteristics. Furthermore, the originality of the research stems from the comparison between strategies using currencies from developed economies and emerging ones. Moreover, the additional academic value comes from the analysis of a new dataset that has not yet been examined. Lastly, our results make an empirical contribution into a country’s economy by reducing market inefficiencies and increasing economic stability. Our sample consists of quantitative data totaling to 2.4 million observations per quotation taken from 2011 and 2013 for currencies picked using a non-probability convenience method based on their property to be converted to EUR and USD currency and availability of information. The research revealed that differences between the two types of market exist, and indicates that the “early” markets possess higher arbitrage activity in contrast to the mature economies. These results should boost the potential for a better trading management and upgrade the profit growth.

Titel:  Flash-krascher – ett allvarligt problem på Stockholmsbörsen? Författare:  Madelene Söderström & Sebastian Roth Handledare: Bo Sjö Ämne:  Nationalekonomi – Kandidatuppsats inom finans Syfte:  Syftet med arbetet är att fördjupa förståelsen kring flash-krascher och vilken påverkan dessa har på handeln av värdepapper som sker på Stockholmsbörsen. Vi hoppas också att studien ger en klarare bild av hur flash-krascher påverkar olika aktörer med koppling till aktiehandeln i Sverige. Metod:  Uppsatsen är baserad på en kvalitativ studie utförd med intervjurespondenter med varierande koppling till Stockholmsbörsen och den svenska finansmarknaden. Teori:  Uppsatsen utgår främst från tidigare forskning inom ämnet bestående av studier baserade på händelser och data från USA. Annan ekonomisk teori som presenteras i studien är adverse selection. Empiri:  Uppsatsen är bestående av sju semistrukturerade intervjuer med aktörer på finansmarknaden. Intervjuerna jämförs med tidigare inträffade händelser i USA för att diskutera möjliga slutsatser om flash-krascher på Stockholmsbörsen. Slutsats:  Studien kommer fram till att det är osannolikt att flash-krascher av den magnituden som inträffat i USA 6 maj 2010 inträffar på Stockholmsbörsen idag. Vidare så verkar flash-krascher inte ha särskilt stor påverkan på aktörer på Stockholmsbörsen, däremot kan det finnas en viss oros- och förtroendeproblematik kopplad till flash-krascher som bör tas på allvar. I studien av tidigare forskning finner vi intressanta teorier för hur flash-krascher kan förutses. Vi kan däremot inte dra några slutsatser kring dessa teorier kopplat till Stockholmsbörsen. / Title:  Flash crashes – a severe problem at Nasdaq OMX Stockholm? Authors:  Madelene Söderström & Sebastian Roth Advisor:  Bo Sjö Subject:  Bachelor thesis in finance Purpose:  The purpose of this study is to understand and critically examine the impact flash crashes might have on the market for securities at Nasdaq OMX Stockholm. Our goal is to provide a clearer view on how flash crashes affect the trade and the market participants. Method:  This thesis is a qualitative study based on interviews with respondents with different approach to both Nasdaq OMX Stockholm and the financial market in Sweden. Theory:  The thesis is based on earlier studies within the subject made from data and events from United States of America. Other economic theories that the thesis involve is adverse selection. Empirics:  The study is predicated around seven semi structured interviews with participants on the financial market in Sweden. The interviews are compared with the earlier events from USA to make for conclusions about flash crashes on Nasdaq OMX Stockholm. Conclusion:  We find that it is unlikely that a flash crash of the same magnitude as the May 6, 2010 flash crash will occur on the Nasdaq OMX Stockholm exchange today. Furthermore, flash crashes appear to have little impact on the market participants at Nasdaq OMX Stockholm, though there may be concerns about trust issues following flash crashes that should be considered. While studying some of the earlier research we find interesting theories about ways to predict flash crashes before they have occurred, we can’t make any conclusions about these theories connected to Nasdaq OMX Stockholm though.

Le but de cette thèse est de répondre au vrai besoin de prédire les fluctuations futures des prix d'actions. En effet, l'aléatoire régissant ces fluctuations constitue pour des acteurs de la finance, tels que les Market Maker, une des plus grandes sources de risque. Tout au long de cette étude, nous mettons en évidence la possibilité de réduire l'incertitude sur les prix futurs par l'usage des modèles mathématiques appropriés. Cette étude est rendue possible grâce à une grande base de données financières et une puissante grille de calcul mises à notre disposition par l'équipe Automatic Market Making de BNP Paribas. Dans ce document, nous présentons uniquement les résultats de la recherche concernant le trading haute fréquence. Les résultats concernant la partie basse fréquence présentent un intérêt scientifique moindre pour le monde académique et rentrent par ailleurs dans le cadre des résultats confidentiels. Ces résultats seront donc volontairement omis.Dans le premier chapitre, nous présentons le contexte et les objectifs de cette étude. Nous présentons, également, les différentes méthodes utilisées, ainsi que les principaux résultats obtenus. Dans le chapitre 2, nous nous intéressons à l'apport de la supériorité technologique en trading haute fréquence. Dans ce but, nous simulons un trader ultra rapide, omniscient, et agressif, puis nous calculons son gain total sur 3 ans. Les gains obtenus sont très modestes et reflètent l'apport limité de la technologie en trading haute fréquence. Ce résultat souligne l'intérêt primordial de la recherche et de la modélisation dans ce domaine.Dans le chapitre 3, nous étudions la prédictibilité des prix à partir des indicateurs de carnet d'ordre. Nous présentons, à l'aide des espérances conditionnelles, des preuves empiriques de dépendances statistiques entre les prix et les différents indicateurs. L'importance de ces dépendances résulte de la simplicité de la méthode, éliminant tout risque de surapprentissage des données. Nous nous intéressons, ensuite, à la combinaison des différents indicateurs par une régression linéaire et nous analysons les différents problèmes numériques et statistiques liés à cette méthode. Enfin, nous concluons que les prix sont prédictibles pour un horizon de quelques minutes et nous mettons en question l'hypothèse de l'efficience du marché.Dans le chapitre 4, nous nous intéressons au mécanisme de formation du prix à partir des arrivés des évènements dans le carnet d'ordre. Nous classifions les ordres en douze types dont nous analysons les propriétés statistiques. Nous étudions par la suite les dépendances entre ces différents types d'ordres et nous proposons un modèle de carnet d'ordre en ligne avec les observations empiriques. Enfin, nous utilisons ce modèle pour prédire les prix et nous appuyons l'hypothèse de la non-efficience des marchés, suggérée au chapitre 3. / The aim of this thesis is to address the real need of predicting the prices of stocks. In fact, the randomness governing the evolution of prices is, for financial players like market makers, one of the largest sources of risk. In this context, we highlight the possibility of reducing the uncertainty of the future prices using appropriate mathematical models. This study was made possible by a large base of high frequency data and a powerful computational grid provided by the Automatic Market Making team at BNP Paribas. In this paper, we present only the results of high frequency tests. Tests are of less scientific interest in the academic world and are confidential. Therefore, these results will be deliberately omitted.In the first chapter, the background and the objectives of this study are presented along with the different methods used and the main results obtained.The focus of chapter 2 is on the contribution of technological superiority in high frequency trading. In order to do this, an omniscient trader is simulated and the total gain over three years is calculated. The obtained gain is very modest and reflects the limited contribution of technology in high frequency trading. This result underlines the primary role of research and modeling in this field.In Chapter 3, the predictability of prices using some order book indicators is studied. Using conditional expectations, the empirical evidence of the statistical dependencies between the prices and indicators is presented. The importance of these dependencies results from the simplicity of the method, eliminating any risk of over fitting the data. Then the combination of the various indicators is tested using a linear regression and the various numerical and statistical problems associated with this method are analyzed. Finally, it can be concluded that the prices are predictable for a period of a few minutes and the assumption of market efficiency is questioned.In Chapter 4, the mechanism of price formation from the arrival of events in the order book is investigated. The orders are classified in twelve types and their statistical properties are analyzed. The dependencies between these different types of orders are studied and a model of order book in line with the empirical observations is proposed. Finally, this model is used to predict prices and confirm the assumption of market inefficiency suggested in Chapter 3.

The thesis analyses high frequency trading, specifically its main characteristics, which make it different from algorithmic trading. Furthermore, the thesis looks closer into major risks, which are new to market, and their impact on market quality and other investors. The next chapter is dedicated to trading strategies, which are typical for high frequency trading. In conclusion, there is discussed the impact on the market quality caused by high frequency trading, namely in terms of liquidity, volatility and price discovery.

We consider Sequential Monte Carlo Approximate Bayesian Computation (SMC ABC) as a method of calibration for the use of agent based models in market micro-structure. To date, there are no successful calibrations of agent based models to high frequency trading data. Here we test whether a more sophisticated calibration technique, SMC ABC, will achieve this feat on one of the leading agent based models in high frequency trading literature (the Preis-Golke-Paul-Schneider Agent Based Model (Preis et al., 2006)). We find that, although SMC ABC's naive approach of updating distributions can successfully calibrate simple toy models, such as autoregressive moving average models, it fails to calibrate this agent based model for high frequency trading. This may be for two key reasons, either the parameters of the model are not uniquely identifiable given the model output or the SMC ABC rejection mechanism results in information loss rendering parameters unidentifiable given insucient summary statistics.

The master's thesis' objective is to study basics of high-frequency trading, especially trading at foreign exchange market. Project deals with foreign exchange data preprocessing, fundamentals of market data collecting, data storing and cleaning are discussed. Doing decisions based on poor quality data can lead into fatal consequences in money business therefore data cleaning is necessary. The thesis describes adaptive data cleaning algorithm which is able to adapt current market conditions. According to design a modular plug-in application for data collecting, storing and following cleaning has been implemented.

Högfrekvenshandel har de senaste åren växt till att bli en betydande kraft på de finansiella marknaderna och således även fått mycket medial uppmärksamhet. Den här medieuppmärksamheten intensifierades den 6: e maj 2010 då "Flash-krashen" inträffade på Dow Jones indexet i New York och påverkade marknader över hela världen. Vår avsikt med den här kandidatuppsatsen är att kritiskt granska högfrekvenshandeln som fenomen samt den diskussion som förs angående ytterligare reglering av handeln. Detta görs genom en inledande period av litteraturstudier som kompletteras med djupintervjuer av olika aktörer på marknaden. Våra resultat visar att högfrekvenshandeln inte för med sig så stora negativa effekter som media målar upp, och att den forskning som gjorts på ämnet indikerar att handeln främst tillför positiva effekter i form av ökad likviditet och minskad volatilitet. Uppsatsen behandlar även dagens regleringssituation och analyserar de förslag på åtgärder som har lagts fram på EU-nivå. Vår analys visar att många av de förslag som diskuteras är direkt missriktade och inte adresserar det egentliga problemet – en situation som kantas av oklara roller gällande tillsyn och övervakning. / High frequency trading has during the last couple of years grown to become a significant force in the financial markets, and therefore it has also gotten a lot of media attention. This media attention intensified on the 6 th of May 2010 when the so called "Flash Crash" occurred at the Dow Jones index in New York and affected markets all over the world. Our intention with this bachelor thesis is to critically examine high frequency trading as a phenomenon and the discussion that is taking place concerning further regulation of the trading. This will be done through an initial period of literature studies that will be complemented with in-depth interviews with different players in the market. Our results show that high frequency trading doesn´t come with such great negative effects as media would like to imply. The research that has been done on the subject indicates that the trading mainly adds positive effects in the form of increased liquidity and decreased volatility. The thesis will also address todays regulatory situation and analyse the proposals for additional regulation that has been discussed on an EU-level. Our analysis shows that many of the discussed proposals are directly misguided and doesn´t address the real problem – a situation that is struggling with unclear roles concerning supervision and monitoring.

Accurate forecasting of stock price movements is crucial for optimizing trade execution and mitigating risk in automated trading environments, especially when leveraging Limit Order Book (LOB) data. However, developing predictive models from LOB data presents substantial challenges due to its inherent complexities and high-frequency nature. In this thesis, the application of the General Compound Hawkes Process (GCHP) is explored to predict price volatility. Within this framework, a Hawkes process is employed to estimate the times of price changes, and a Markovian model is utilized to determine their amplitudes. The price volatility is obtained through both numerical and analytical methodologies. The performance of the GCHP is assessed on a publicly available dataset, including five distinct stocks. To enhance accuracy, the number of states in the Markov chain is gradually increased, and the advantages of incorporating a higher-order Markov chain for refined volatility estimation are demonstrated.

高頻率交易在近年已漸成為全球趨勢，在世界各主要交易所的交易型態中都占有相當的比例。高頻率交易雖因係非僅有單一策略型態的套利行為，而目前尚未有明確之定義，然簡言之，其係指於毫秒等級的微小時間內，利用複雜的計算機運算系統挾帶速度優勢來進行迅速探測出市場上股票或期貨微小的價格差異並從中套利之交易模式。高頻率交易的特性是「交易頻繁，但每次獲利微薄」，且通常是當沖交易。然而，此種立基於快速撮合的逐筆交易制度以及資訊軟硬體設備進步而生之新型交易模式，除能帶來增加交易市場流動性、促進市場活絡等優點以外，亦藏有使股市因無意向成交而產生劇烈波動或造成市場秩序不公平等風險，如著名的美國2010年閃電崩盤即為一例。 我國證券市場的交易制度幾經更迭，現行所採之集合競價的撮合間隔時間一路從20秒降至現行的5秒，然仍遲未採行各國趨勢之逐筆交易制度。現任證交所董事長施俊吉對此也於2016年12月13日受訪時指出，集合競價交易方式已屬老式且落伍，逐筆交易已水到渠成，運作尚有賴券商業者大力配合。只要券商準備好即可隨時啟動。 證券交易市場首重公平性，此於我國證券交易法立法目的即可觀之。我國雖因未採行逐筆交易制度，目前尚未面臨高頻率交易之挑戰，然於可預見之未來，我國實施逐筆交易制度後，高頻率交易的產生以及比重無可避免地將有隨之增加之可能。此時我國證券交易市場所將面臨的，即高頻率交易究竟有無促進市場效率、抑或破壞市場公平性；以及我們又該如何將之規範以兼顧市場整體利益與投資人保護等考驗。 本論文以現行我國交易制度的發展動向為脈絡，並以未雨綢繆之角度初探高頻率交易此一議題，藉參考他國就此交易模式之制度與規範方向，自我國現行證券交易法之制度下進行檢視及討論，藉此試提出於我國推行逐筆交易後，發生高頻率交易時之相關配套建議以及對投資人的保護措施，做為我國日後實際推行逐筆交易制度與高頻率交易時之參考依據。 / High-frequency trading (HFT) has become a global trend in recent years. It accounts for a considerable proportion in the world's major exchanges. HFT is not only a single strategy for the type of arbitrage behavior; hence, there is still no clear definition of it. But in short, it refers to a type of algorithmic trading characterized by "frequent transactions with minute profit". Despite the benefit of increasing the liquidity of market and promoting market activity, it also has some disadvantages such as interfering the market order and the risk of unfairness. The well-known case, Flash Crash, of America in 2010 is so one example of HFT. The securities market trading system of Taiwan, Call Auction, has changed several times. The interval of the auction collecting and matching time has been all the way from 20 seconds down to the 5 seconds in current. But the final goal, Trade by Trade Matching transaction, has not yet been adopted so far. In December of 2016, the current chairman of Taiwan Stock Exchange said that Call Auction transaction is now old-fashioned and outdated, Trade by Trade Matching transaction has become a matter of course. Trade by Trade Matching transaction is just right around the corner, and it’s ready to launch as long as the brokers are ready. Fairness is the first priority in securities market. While Taiwan has not yet adopted the Trade by Trade Matching transaction and has not yet faced the challenges of HFT, Taiwan will no doubt implement it in the foreseeable future, and therefore the possibility of the appearance and the proportion of HFT in our market will be increasing. At the same time, HFT will be faced with whether it will promote market efficiency or undermine the fairness of the market. How should we regulate it and how to protect the interests of investors and the overall benefit of our market will also become our tests. This thesis takes the development trend of current trading system in Taiwan as a starting point and probes into the issue of HFT from the view of precaution. By referring to the trading system and regulations toward HFT of other countries, this thesis try to propose relevant suggestions and protection measures for investors and appropriate regulations of market after the implementation of Trade by Trade Matching transaction and the embracement of HFT in Taiwan.