Computerised trading at low & high frequency

Workshop theme

Around 1970, Carver Mead coined the term "Moore's law" in reference to Moore's statement that transistor counts would double every year. There is some debate over whether this "law" is empirically valid, yet everyone agrees that the last forty years have seen an explosive growth in the power and performance of computers. Financial markets have consistently exploited this technological advance, and they are one of the grounds where the limits of computing power are challenged every day. This computing power is harnessed to execute and handle the life cycle of a trade, and to spot trends in and across various financial markets. This predominant market activity is known as Algorithmic Trading (AT) and as Computerised Trading in its more general form.

Nowadays, nearly all trades in all markets and all asset classes are executed and handled by computers. This is possible due to:

1. the increase in computer power
2. the highly sophisticated mathematical and statistical tools and methods that are used to develop the trading algorithms
3. the architecture of modern (post 2000) electronic markets

Computerised Trading has become the standard exchange method in financial markets; nevertheless some aspects of AT (mainly those related to algorithms that operate at ultra-high speeds) have been in the spotlight of financial regulators who are responsible for the functioning of electronic markets and are concerned with how Computerised Trading at ultra-high exchange speeds affects the quality of modern markets. Financial markets are essential in order for companies to raise capital, and to provide a venue for secondary trading. From a social welfare perspective, a society should aim for well-functioning markets which timely provide liquidity at a fair price and allocate capital efficiently. This role is under serious scrutiny, and decisions made on a scientific basis will aid the discussion and will provide a solid ground for policy making.

The scoping meeting at the Isaac Newton Institute aims at bringing together world-leaders in Mathematics, Statistics, Computer Science and Financial Economics. During the first two days, most delegates will present state-of-the-art research in their fields of expertise. Some participants will present research work on Computerised Trading and on related topics whilst others will contribute to the scientific discussion by sharing their latest results in their cutting-edge research field. Due to the interdisciplinary nature of Computerised Trading, it is expected that research areas which at first glance might not seem related to computerised markets will in fact enrich the scientific debate of this scoping meeting.

The third day will be devoted to discussing and scoping out the topics and other aspects of a thematic programme on Computerised Trading at low and high frequency. The main objective of this day is for experts in academia and the industry to help in the design of such a scientific programme where the input of those that are conducting research in Computerised Trading as well as those who are not directly involved in Computerised Trading can discuss the depth and breath of the thematic programme. This is perhaps one of the rare opportunities for mathematical, statistical, computer and social sciences to have an interdisciplinary ground to shape important aspects of modern financial markets and the role that science will play therein.

Discussion topics proposed for the round table will focus on the mathematical and financial aspects of:

• systemic risk
• transaction costs
• information
• real-time feedback
• liquidity
• dependence modelling

• market impact
• large data sets
• data mining
• machine learning
• optimal market making
• market quality

• architecture of electronic markets
• limit order books
• financial bubbles
• non-linear partial differential equations
• stochastic control problems
• statistics of stochastic processes

We anticipate of course that several other topics will arise during the three-day meeting. The primary goal is to harness the vast expert knowledge this interdisciplinary event brings with it in order to produce a detailed map of the mathematical, physical and social sciences present in the fore- or background of modern financial markets.

Invited speakers will include:

Participation is by invitation only.