Too fast too furious: Faster financial-market trading agents can give less efficient markets

John Cartlidge, Marco De Luca, Charlotte Szostek, Dave Cliff

Research output: Chapter in Book/Report/Conference proceedingConference Contribution (Conference Proceeding)

18 Citations (Scopus)
562 Downloads (Pure)

Abstract

For many of the world's major financial markets, the proportion of market activity that is due to the actions of “automated trading” software agents is rising: in Europe and the USA, major exchanges are reporting that 30%—75% of all transactions currently involve automated traders. This is a major application area for artificial intelligence and autonomous agents, yet there have been very few controlled laboratory experiments studying the interactions between human and software-agent traders. In this paper we report on results from new human-agent experiments using the OpEx experimental economics system first introduced at ICAART-2011. Experiments explore the extent to which the performance of the traders, and of the market overall, is dependent on the speed at which the agents operate. Surprisingly, we found that slowing down the agents increased the market's overall ability to settle to a competitive equilibrium, and that slow-agent markets were more efficient.
Original languageEnglish
Title of host publicationICAART-2012: Proceedings of the Fourth International Conference on Agents and Artificial Intelligence, Vol. 2 (Agents)
EditorsJoaquim Filipe, Ana L. N. Fred
Place of PublicationVilamoura, Algarve, Portugal
PublisherSciTePress
Pages126-135
Number of pages10
ISBN (Print)978-989-8425-96-6
DOIs
Publication statusPublished - Feb 2012
EventICAART-2012: 4th International Conference on Agents and Artificial Intelligence - Vilamoura, Algarve, Portugal
Duration: 6 Feb 20128 Feb 2012

Conference

ConferenceICAART-2012: 4th International Conference on Agents and Artificial Intelligence
Country/TerritoryPortugal
CityVilamoura, Algarve
Period6/02/128/02/12

Keywords

  • financial markets
  • financial trading
  • automated trading
  • high frequency trading
  • HFT
  • behavioural economics

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