Designing a Trading Center in a High-Tech Environment
Texas Tech University
Wayne State University - Department of Finance
University of Arizona - Department of Finance
January 10, 2013
Designing a well-functioning trading center warrants the consideration of some principles of automation. First, automation and humans comprise a system having some optimal level of automation. Second, the human is the ultimate authority regardless of the level of automation. Within this context, we survey the literature on markets' susceptibility to automation and the effect of automation on market characteristics. Generally, markets' existing microstructure, the potential size of trades, and the potential frequency of transactions impact the level of automation. Finally, automation increases the speed of trading and reduces execution costs and cost of equity, while market efficiency is generally unchanged.
Number of Pages in PDF File: 34
Keywords: automation, electronic trading, computerized trading, human intermediation
JEL Classification: G1, G2working papers series
Date posted: July 28, 2010 ; Last revised: January 11, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
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