Skip navigation
Please use this identifier to cite or link to this item: http://arks.princeton.edu/ark:/88435/dsp010v8383004
Title: Visualizing the Trading Networks: An Analysis of Systemic Risk in High Frequency Trading Markets
Authors: Ho, Andrea
Advisors: Carmona, Rene
Department: Operations Research and Financial Engineering
Class Year: 2016
Abstract: As stock exchanges replaced physical trading floors with an electronic environment, high frequency trading began to emerge. While high frequency traders theoretically provide liquidity, certain behaviours have been criticized for increasing instability in the market. Some of high frequency trading’s most infamous strategies include spoofing, where brokers cancel trades within milliseconds of submission; and quote stuffing, where traders overwhelm the exchanges with large number of orders, cancellations, and updates to slow down the system and hide their own strategy. Brokers may also put in orders with prices far from the bid and ask price, meaning that they do not actually intend to have the orders executed. Because most of these actions occur anonymously, it is difficult to determine the source of these orders. While most order books do not reveal the identity of the buyer and seller of each trade, the Toronto Stock Exchange does. With this new information, this study investigates how high frequency traders interact with each other by plotting an animation the trading network over time. In addition, this paper will identify the key players of the Toronto Stock Exchange and will perform a theoretical exercise that removes these active traders from the network. In doing so, this paper will study how the trading networks react to the missing broker. The resulting state of the network provides great implications on the amount of influence a single, active broker may have on the trading network, which in turn indicates the level of systemic risk in high frequency trading markets.
Extent: 115 pages
URI: http://arks.princeton.edu/ark:/88435/dsp010v8383004
Type of Material: Princeton University Senior Theses
Language: en_US
Appears in Collections:Operations Research and Financial Engineering, 2000-2016

Files in This Item:
File Description SizeFormat 
Ho_Andrea_final_thesis.pdf1.63 MBAdobe PDF    Request a copy
Cascade9_2008.gif25.82 MBGIF    Request a copy
Original_Open_2008.gif885.25 kBGIF    Request a copy
Cascade2_2008.gif26.05 MBGIF    Request a copy
Original_Cross_2008.gif445.1 kBGIF    Request a copy
Original_Cont_2008.gif26.04 MBGIF    Request a copy
Cascade7_2008.gif26.09 MBGIF    Request a copy
Original_MOC_2008.gif929.96 kBGIF    Request a copy
Cascade13_2015.gif19.07 MBGIF    Request a copy
Cascade7_2015.gif20.72 MBGIF    Request a copy
Cascade79_2015.gif19.39 MBGIF    Request a copy
Original_Cont_2015.gif22.25 MBGIF    Request a copy
Original_Cross_2015.gif123.86 kBGIF    Request a copy
Original_MOC_2015.gif1 MBGIF    Request a copy
Original_Open_2015.gif834.83 kBGIF    Request a copy


Items in Dataspace are protected by copyright, with all rights reserved, unless otherwise indicated.