Doctoral thesis: Algorithmic trading has no harmful effects on market quality
- Financial markets and the pace of trading have changed dramatically over last decade as the trading has moved from traditional physical floors to electronic trading platforms and most market participants now employ automated, algorithmic strategies, says Sergey Osmekhin, who will defend his doctoral thesis in finance at the Hanken School of Economics on 22 April 2016.
Osmekhin´s thesis: “Essays on Algorithmic Trading” consist of three essays that address the effect of algorithmic trading on the market in general, trading costs, and market efficiency.
In his thesis, Osmekhin studies how algorithmic trading affects market properties, and concludes that the activity of algorithmic traders does not have harmful effect on market quality. He bases his analysis on a unique set of data from NASDAQ OMX Nordic and aims at identifying causality without relying on exogenous events, like previous studies do. Osmekhin also analyses the impact of trading fees on market properties, based on the development that the increase in algorithmic trading has resulted in different fees for makers and takers on the market. By using the natural experiment of unifying the tariff structure of the NASDAQ OMX Nordic exchange trading price lists, he tests if the change of the exchange fees is less than the uncertainties of bid-ask spread. Osmekhin’s conclusion is that the impact of the change is economically insignificant.
In addition, Osmekhin presents a quantitative approach to measure market efficiency, based on the waiting time distribution. By constructing mean-reverting portfolios of cross-listed stocks, he observes that inefficient price states outside the optimal barrier levels tend to converge back rapidly. The farther the spread diverges from its mean, the quicker the mean-reversion is.
The findings presented in the thesis can be relevant for investors, regulators, and policy makers internationally.
M.Sc. Sergey Osmekhin defends his doctoral thesis in Finance: ”Essays on Algorithmic Trading” Friday, 22 April 2016.
Date and Time: 22.4.2016, at 12
Location: Room 309, Hanken School of Economics, Helsinki.
Opponent: Professor Juho Kanniainen, Tampereen Teknillinen Yliopisto
Custos: Professor Timo Korkeamäki, Hanken School of Economics
A copy of the thesis can be downloaded via this link:
http://hdl.handle.net/10138/161144
