Too Fast, Too Furious? Algorithmic Trading and Financial Instability

Lise Arena (), Nathalie Oriol and Iryna Veryzhenko
Additional contact information
Lise Arena: GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur
Iryna Veryzhenko: LIRSA - Laboratoire interdisciplinaire de recherche en sciences de l'action - CNAM - Conservatoire National des Arts et Métiers [CNAM]

Post-Print from HAL

Abstract: To what extent can algorithmic trading-based strategies explain the propagation of flash crashes on financial markets? This question has to be discussed at the intersection of two disciplinary fields: management of information systems and finance. Built on realistic assumptions on traders' strategies, on their use of algorithmic information systems and considering the role of transactions systems at the market level, an agent-based approach is presented. Final results show that speed-oriented trading strategies and the increasing use of new trading technologies can arm markets' stability and resiliency, facing intraday operational shocks. The article also shows the central role played by transactions systems in the propagation of flash crashes, when a new regulation based on the principle of decimalization is introduced.

Keywords: Information technologies; Flash crash; Agent-based approach; High frequency trading strategies (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cmp and nep-mst
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01789636
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in Systèmes d'Information et Management, 2018, 23 (2)

Downloads: (external link)
https://shs.hal.science/halshs-01789636/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01789636

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().