The rise of the machines in commodities markets: new evidence obtained using Strongly Typed Genetic Programming

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Publication details

JournalAnnals of Operations Research
DateE-pub ahead of print - 25 Aug 2016
DatePublished (current) - 1 Jan 2018
Issue number1-2
Volume260
Number of pages32
Pages (from-to)321-352
Early online date25/08/16
Original languageEnglish

Abstract

Market regulators around the world are still debating whether or not high-frequency trading (HFT) is beneficial or harmful to market quality. We develop artificial commodities market populated with HFT scalpers and traditional commodities traders using Strongly Typed Genetic Programming (STGP) trading algorithm. We simulate real-life commodities trading at the millisecond timeframe by applying STGP to the S&P GSCI data stamped at the millisecond interval. We observe that HFT scalpers anticipate the order flow leading to severe damages to institutional traders. To mitigate the negative implications of HFT scalpers on commodities markets, we propose a minimum resting trading order period of more than 150 ms.

    Research areas

  • Algorithmic trading, Commodities markets, Evolutionary algorithms, High frequency trading, Market efficiency, Market regulation

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