Abstract
Some major financial markets are currently reporting that 50 % or more of all transactions are now executed by automated trading systems (ATS). To understand the impact of ATS proliferation on the global financial markets, academic studies often use standard reference strategies, such as “AA” and “ZIP”, to model the behaviour of real trading systems. Disturbingly, we show that the reference algorithms presented in the literature are ambiguous, thus reducing the validity of strict comparative studies. As a remedy, we suggest disambiguated standard implementations of AA and ZIP. Using Exchange Portal (ExPo), an open-source financial exchange simulation platform designed for real-time behavioural economic experiments involving human traders and/or trader-agents, we study the effects of disambiguating AA and ZIP, before introducing a novel method of assignment-adaptation (ASAD). Experiments show that introducing ASAD agents into a market with shocks can produce counter-intuitive market dynamics.
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Notes
- 1.
The final report from that investigation was published in Oct. 2012, and is available at: http://bit.ly/UvGE4Q.
- 2.
For an earlier version of the work presented here, we refer the reader to [23].
- 3.
We do not suggest that two is the optimum multiplier for this equation; rather we aim to investigate the effect of introducing this modification and select two as a simple heuristic estimate.
- 4.
For a lengthy discussion on the consequences of the max spread rule, see [5].
- 5.
Since this issue was raised by [5], the spread jumping rule has subsequently been classified as a bug and removed from De Luca’s OpEx AA agents (http://sourceforge.net/p/open-exchange/tickets/1/).
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Acknowledgments
The authors would like to thank Tomas Gražys for significant development of the ExPo platform. John Cartlidge is supported by EPSRC grant, number EP/H042644/1; primary financial support for Dave Cliff’s research comes from EPSRC grant, number EP/F001096/1.
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Stotter, S., Cartlidge, J., Cliff, D. (2014). Behavioural Investigations of Financial Trading Agents Using Exchange Portal (ExPo). In: Nguyen, N., Kowalczyk, R., Fred, A., Joaquim, F. (eds) Transactions on Computational Collective Intelligence XVII. Lecture Notes in Computer Science(), vol 8790. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-44994-3_2
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