most recent 30 from http://mathoverflow.net 2013-05-24T08:51:55Z http://mathoverflow.net/feeds/question/27161 http://www.creativecommons.org/licenses/by-nc/2.5/rdf http://mathoverflow.net/questions/27161/responses-from-mathematicians-concerning-flash-trading Halfdan Faber 2010-06-05T15:02:37Z 2010-06-05T18:37:00Z

<p>Have there been any responses from the mathematics community regarding flash trading, for example from a game theory or system dynamics point of view? Please answer with personal comments or references.</p> <p>According to Wikipedia: "Flash trading is a controversial practice of some financial exchanges whereby certain customers are allowed to see incoming orders to buy or sell securities very slightly earlier than the general market participants, typically 30 milliseconds, in exchange for a fee. With this very slight advance notice of market conditions, traders with access to extremely powerful computers can conduct rapid statistical analysis of the changing market state and carry out high-frequency trading ahead of the public market.[1]</p> <p>Critics of the practice contend this creates a two-tiered market in which a certain class of traders can unfairly exploit others, akin to front running.[2] Exchanges claim that the procedure benefits all traders by creating more market liquidity and the opportunity for price improvement."</p> <p><a href="http://en.wikipedia.org/wiki/Flash_trading" rel="nofollow">http://en.wikipedia.org/wiki/Flash_trading</a></p> <p><a href="http://www.nytimes.com/2009/07/24/business/24trading.html" rel="nofollow">http://www.nytimes.com/2009/07/24/business/24trading.html</a></p>

http://mathoverflow.net/questions/27161/responses-from-mathematicians-concerning-flash-trading/27184#27184 anon 2010-06-05T18:37:00Z 2010-06-05T18:37:00Z

<p>I don't believe there are many academic mathematicians who will be familiar with the nuances of stock exchange networks, so probably not the best MO question. That said, both the wikipedia and NYT article are gross oversimplifications of flash trading and have very misleading statements. For more informed (if biased) opinions, why don't you start with <a href="http://online.wsj.com/article/SB10001424052970203706604574374431720968204.html?mod=googlenews_wsj" rel="nofollow">http://online.wsj.com/article/SB10001424052970203706604574374431720968204.html?mod=googlenews_wsj</a></p> <p><a href="http://fridayinvegas.blogspot.com/2009/09/you-really-shouldnt-care-so-much-about.html" rel="nofollow">http://fridayinvegas.blogspot.com/2009/09/you-really-shouldnt-care-so-much-about.html</a></p> <p>The informed arguments against flash trading are usually about it being anticompetitive among networks, and not game-theoretic.</p>