Trading Floor Research Articles

Economic Policy Towards Domestic Stock Exchanges

Abstract Over the past forty years, stock exchanges have undergone a number of transformations (legal, organizational and technological). They resulted both from general external conditions (including technological progress) as well as were the expression of various economic (structural) policies. Two of which seem to be basic. The first implemented in France, based on optimal centralization of stock exchange trading. The second one, implemented in Germany and Spain, expressing the concept of a complementary and effective combination of the potentials of the main trading floor and regional exchanges. Promisingly, especially in this latter dimension of experience together with the Edinburgh ‘stock market experiment’ that has just begun, they may reveal yet another not yet fully recognized characteristics of the stock market - the institutional exemplification of the market economy.

Investigating Gender Differences under Time Pressure in Financial Risk Taking.

There is a significant gender imbalance on financial trading floors. This motivated us to investigate gender differences in financial risk taking under pressure. We used a well-established approach from behavior economics to analyze a series of risky monetary choices by male and female participants with and without time pressure. We also used second to fourth digit ratio (2D:4D) and face width-to-height ratio (fWHR) as correlates of pre-natal exposure to testosterone. We constructed a structural model and estimated the participants' risk attitudes and probability perceptions via maximum likelihood estimation under both expected utility (EU) and rank-dependent utility (RDU) models. In line with existing research, we found that male participants are less risk averse and that the gender gap in risk attitudes increases under moderate time pressure. We found that female participants with lower 2D:4D ratios and higher fWHR are less risk averse in RDU estimates. Males with lower 2D:4D ratios were less risk averse in EU estimations, but more risk averse using RDU estimates. We also observe that men whose ratios indicate a greater prenatal exposure to testosterone exhibit a greater optimism and overestimation of small probabilities of success.

How Do Institutional Investors Trade

Using a novel and detailed custody trades dataset, this paper analyzes the trading behavior of institutions. Extant studies have examined the effects of past performance on trading by retail investors, day traders, and futures floor traders. Yet very little work has been done on institutions. We find that unlike other investors, institutions take on more risk following an increase in net profit and loss. However, the responses to a gain and loss are highly asymmetric. Institutions aggressively reduce risk in the wake of losses, but only mildly increase risk in the wake of gains. This asymmetry is more pronounced for experienced and older funds. Further, the performance dependence varies over the calendar year, and manifests itself at the security but not at the portfolio level. We relate these findings to the behavioral theories of narrow framing, dynamic loss aversion, and overconfidence.

Historical Curiosities of Wall Street: A Brief Guide

In 1870, the United States was a very different country, and the NYSE was a speculator's playground. … Almost no financial information was available to the public except for the dividend on a stock—rumors and market-share corners created an atmosphere that was much more like a commodity trading floor than the sedate industry we have now.

Front and Back Covers, Volume 33, Number 2. April 2017

Front and back cover caption, volume 33 issue 2Front & back coverMAGIC & CAPITALISMArchitecture, marketing, advertising, fashion, design and technology – these are not themes that generally come to mind when we think about magic. In industrialized societies we tend to believe that we've ‘outgrown’ it. In 1929 anthropologist E.B. Tyler called magic ‘one of the most pernicious delusions that ever vexed mankind’. But in fact, magic is alive and well in contemporary capitalistic societies.Magic is at work in all sorts of modern practices from fashion design to architecture, by way of fashion shows, legal contracts and various forms of cultural production such as advertising, architecture, luxury goods and marketing fetishes. These magical practices form a coordinated system, or systems, of magic and are performed in various societies and contexts around the globe.As the authors demonstrate in this second special issue of ANTHROPOLOGY TODAY, magic isn't an antonym for ‘reality’ or business rationality – it is an integral and enchanting part of the practices and systems that business ethnographers work to understand.Every magical system includes one or more central operations in which the magician acts, formulas are at work and practices are structured within sacred rituals. An economic summit, a trading floor, an operating theatre, a film set, a court of law, a television talk show – such magical rites are often precisely those which, at first glance, seem to be imbued with the least amount of sacred power but in the end, all are designed to ‘consecrate’ a particular field.From Harry Potter and Diagon Alley at Universal Studios, Florida, to transformative images of harbingers of change, magic thrives in the mundane everyday practices upon which our capitalistic endeavours are built.

The Private Equity Market in Poland and in Central and Eastern Europe: Selected Aspects

The political transformation that took place in Poland only 25 years ago allowed a re-launch and development of the most important capital market institution – the stock exchange. Today, the Warsaw Stock Exchange is the largest in Central and Eastern Europe, being among top European trading floors in terms of the number of new listings. Investors choose Poland to invest their capital both because it is the biggest economy in this region and precisely because of its developed capital market and stable and modern banking sector as well as visible activities of institutions supporting entrepreneurship. Marked growth rates of macroeconomic indicators and economic stability so far have directly influenced Poland’s attractiveness, encouraging investors to operate in the private equity market as well. Poland and countries of Central and Eastern Europe are emerging markets that are still catching up with Western Europe. The results presented in the article are based on source data from annual reports and publications that have been produced and made available by capital market institutions and from the authors’ own research on Polish entrepreneurship. The scope and volume of private equity financing in Central and Eastern Europe and in Poland are characterised by means of analyses, charts and comparisons, highlighting the importance and leading role of Poland as a country that is the first choice for private equity investors in this region.

Risk‐based medium‐term trading strategy for a virtual power plant with first‐order stochastic dominance constraints

Distribution systems of the future will definitely encompass numerous distributed energy resources, and thereby, the physical connection and commercial contribution among virtual power plants (VPPs) will be inevitable. Accordingly, this study proposes a methodology to address the trading strategies of a VPP in cooperation with its neighbouring VPPs. This cooperation is modelled based on some available cross-regional contracts and the problem faced by the VPP is how to determine its bilateral contracting portfolio. To this end, a decision-making framework for medium-term self-scheduling of a VPP with the aim of exercising arbitrage between two different trading floors, i.e. bilateral contracts and the electricity market, is presented. Moreover, an efficient risk management approach based on the concept of first-order stochastic dominance constraints is used to enable informed decision making under different levels of uncertainty. The resulting model is formulated as a mixed-integer linear programming problem that can be solved using off-the-shelf software packages. The efficiency of the proposed model is analysed through a detailed case study, and finally relevant conclusions are duly drawn.

The Brexit Unknown—Britain's Boom or Bust?

This case invites students to assess the impact that Brexit, the withdrawal of the United Kingdom from the European Union, might have on a New York–based hedge fund's portfolio and, specifically, its UK assets. The case is designed to prompt students to make market assumptions and investment hypotheses based on a combination of numerical data and qualitative information. It requires no numerical computations; instead, it asks the student to interpret both markets' short-term reactions to the Brexit vote and strategy shifts from UK and European business leaders in order to evaluate longer-term implications for the economies of the United Kingdom, Europe, and the world. Excerpt UVA-F-1780 Rev. Jun. 28, 2017 The Brexit Unknown—Britain's Boom or Bust? “Brexit would make some people very rich—but most voters considerably poorer.” -George Soros, billionaire investor, June 2016 Chuck Todd sat on his hedge fund's New York trading floor on October 20, 2016, scouring the Financial Times and Bloomberg websites for any new insights on the lengthy process of the United Kingdom withdrawing from the European Union (EU), popularly termed “Brexit.” Ever since the country's historic EU membership referendum held on June 23, the results of which shocked the world with a narrow majority (52%) of UK citizens voting to leave the EU after more than four decades of membership, details failed to elucidate both a clear timeline and framework for Britain's soon-to-be independent relationship with the EU, leaving the country in an extended state of economic, political, and social uncertainty. Todd's fund held a number of UK assets in its portfolio, and he hoped to determine how the terms of Brexit might impact not just the $ 2.9 trillion British economy as a whole but also the multiple sectors within it. . . .

Haute finance in the not-so-quiet revolution: colonialisme Anglo-Saxonne and the bombing of la Bourse de Montréal

ABSTRACTThis paper examines a situation in which finance is perceived as imperialist – as immanent to, and serving the interests of, a single ‘culture’ in the colloquial sense. The analysis centres on the long-forgotten 1969 bombing of the trading floor of la Bourse de Montréal (the Montréal Stock Exchange), a moment in an intense phase of the Québécois movement for independence from Canada. Because of the way in which the bombers framed the attack, and its political-economic and discursive contexts, the bombing presents an opportunity to think about key features of the relation between finance and cultural domination or imperialism. These features relate to finance’s specific articulation to the future, uncertainty, and, in the words of the séparatistes of the time, cultural ‘destiny’. The paper has three parts. The first describes the bombing of la Bourse and the public, media, and state responses, linking it to Québécois cultural-political geographies at several scales. Part two places the bombing in the longer-run cultural-politicization of finance in the francophone independence movement, to outline a specifically Québecois critique of finance capital. The third part considers finance’s perceived and real connection to, and thus capacity to shape or constrain, the cultural-political construction of collective possibility.

Interoceptive Ability Predicts Survival on a London Trading Floor.

Interoception is the sensing of physiological signals originating inside the body, such as hunger, pain and heart rate. People with greater sensitivity to interoceptive signals, as measured by, for example, tests of heart beat detection, perform better in laboratory studies of risky decision-making. However, there has been little field work to determine if interoceptive sensitivity contributes to success in real-world, high-stakes risk taking. Here, we report on a study in which we quantified heartbeat detection skills in a group of financial traders working on a London trading floor. We found that traders are better able to perceive their own heartbeats than matched controls from the non-trading population. Moreover, the interoceptive ability of traders predicted their relative profitability, and strikingly, how long they survived in the financial markets. Our results suggest that signals from the body - the gut feelings of financial lore - contribute to success in the markets.

Wind offering in energy and reserve markets

The increasing penetration of wind generation in power systems to fulfil the ambitious European targets will make wind power producers to play an even more important role in the future power system. Wind power producers are being incentivized to participate in reserve markets to increase their revenue, since currently wind turbine/farm technologies allow them to provide ancillary services. Thus, wind power producers are to develop offering strategies for participation in both energy and reserve markets, accounting for market rules, while ensuring optimal revenue. We consider a proportional offering strategy to optimally decide upon participation in both markets by maximizing expected revenue from day-ahead decisions while accounting for estimated regulation costs for failing to provide the services. An evaluation of considering the same proportional splitting of energy and reserve in both day- ahead and balancing market is performed. A set of numerical examples illustrate the behavior of such strategy. An important conclusion is that the optimal split of the available wind power between energy and reserve strongly depends upon prices and penalties on both market trading floors.

Станет ли природный газ товаром мировой биржевой торговли?

The article deals with the evolution of gas industry and the prospects of conversion of natural gas into a world exсhange traded commodity. The prerequisites and restrictions of such a conversion are scrutinized. Currently, the liquefied natural gas (LNG) is becoming a major tool for operational balancing of the short-term swings in demand for gas in different regions of the world. The opportunities for transcontinental price arbitrage are growing. Its further development will lead to the emergence of a stable (adjusted for geopolitical factors) variations in prices in America, Europe and Asia, reflecting the cost of transportation (freight) and liquefaction. Alignment of LNG netback prices in all areas of its delivery will be one of the signs of a full commoditization of the natural gas. Natural gas commoditization in a global scale is supported by the increasing “gas-to-gas competition” pricing mechanism based on short-term trading. At the moment, the Henry Hub serves as a full-fledged indicator of prices for the North American market. Similarly, NBP and TTF send increasingly strong price signals to the European market. At the same time, the role of the only visible Asian spot area – Shanghai stock exchange – is still insignificant. The spot hubs already serve as delivery outlets for execution of gas futures’ contracts and other financial instruments concluded on the key world stock exchanges – New York Mercantile (NYMEX), London Futures (ICE-Futures), Singapore Mercantile Exchange (SMX). These global trading floors are likely to form the infrastructure of future universal system of price indication. Commoditization of natural gas will provide a powerful impetus to a convergence of the markets of pipeline gas and LNG worldwide. The understanding of this perspective, besides the general theoretical interest, is important in terms of assessing the competitiveness of Russian gas in the world natural gas markets in the next decades.

Connectivity Solutions in Automated Trading

Abstract The study analyzes the architecture and deployment of direct market access (DMA) solutions for automated trading of securities. It provides an overview of automated trading systems including: trading floor architecture, trading environment connectivity, and DMA solutions. Among a range of factors influencing operational capacities, round-trip latency has been recognized as the key quality differentiator of an automated trading floor. The study identifies potential opportunity costs due to latency levels as a major driver of technological progress in trading in highly liquid market conditions.

Air pollution and stock returns: Evidence from a natural experiment

Previous studies have documented the existence of a relationship between air pollution and people's moods and between people's moods and stock returns. To investigate if the link between local air pollution and domestic equity returns is mediated by the trading floor community, we use the transition of Italy's main stock exchange from a trading floor technology to an electronic and delocalized trading system as a natural experiment. In addition, we take advantage of differences in trading technology across a sample of major international stock exchanges. In both instances, we document the existence of an air pollution effect only when trading is conducted on the floor, which provides evidence in support of the view that the air pollution effect is at least partly mediated by the behavior of the trading floor community.

The Un-real Deal: Financial Fiction, Fictional Finance, and the Financial Crisis

The credit crisis of 2007–8 prompted a Manichean discourse that labeled finance the flighty and unreal other of the solidity of the real economy. Almost overnight the “speculative finance” shifted from a descriptive term to an evaluative one, with freewheeling finance singled out as the main cause of the crisis. The fictionality of finance is, of course, a fiction itself. Not only is finance a part of the real economy but since the 1970s it has played an increasingly significant part in it. This essay aligns with recent work in critical finance studies that puts pressure on the idea that finance can be separated from the real economy. Supplementing the world-historical scale at which this work often remains, this essay theorizes the real abstraction of finance through its lived social experience. The year 1973 was replete with financial events: the end of the Bretton Woods agreement and the gold standard, the Middle East oil crisis, the creation of the Chicago options exchange, and the invention of the Black–Scholes equation governing derivatives. It also saw the birth of the financial thriller with Paul Erdman’sThe Billion Dollar Sure Thing. Seizing upon a formulaic genre and opening it up to a flood of real events from the trading floor, the financial thriller acts as a dynamic interface and sensitive seismograph for theorizing the fictionality of finance. This essay opens with a reading of Bret Easton Ellis’sAmerican Psycho(1991) as an example of a work that renders real abstraction in an explicitly social way. Rather than viewing the novel as a hyperbolically postmodern reflection of abstract financial maneuvers, I argue that it is thickly embedded within the historically specific financial cityscape of 1980s Manhattan. I then turn to a comparative reading of recent financial thrillers written in response to the twenty-first-century credit collapse. Unlike Ellis’s novel, these thrillers strive to keep the unreality of finance segregated from the real economy at the level of plot, while also making use of generic strategies to do so at the level of form, pushing financial data into footnotes, descriptive asides, and a different tonal register of narrative. By reading these thrillers alongsideAmerican Psycho, a book written before the shock of terminal economic crisis, I offer a more historically nuanced reading of their attempts to salvage a workable economy out of the mess of the twenty-first-century American economy.

The Effect of Settlement Rules on Trading Behavior

On June 25, 2012 the Chicago Board of Trade (CBT) changed the procedure for determining reference (settlement) prices for their corn futures contract. Prior to the change, settlement prices were based on prices in trades executed on the exchange floor during the final minute of the floor trading session. Since the change, settlement price have been based on both electronic trades and floor trades made during the final minute. We propose a theoretical model exploring the incentive to manipulate settlement price under the two alternative settlement regimes The model generates a number of empirical predictions, including predictions for the composition of trading. To test these predictions, we make use of a unique, proprietary data set comprised of individual transactions in the CBT’s corn futures market, and find that all of them are supported by data. For example, consistent with the model, the ratio of floor trading to total trading during the final minute decreased, from 31% to 12%, following the rule change. Another key prediction of our model is that the size and direction of an individual trader’s position entering the settlement period should affect their trading behavior, which also matches what we observe in the data.

Financial intermediaries in the midst of market manipulation: Did they protect the fool or help the knave?

We examine a fund manager's alleged manipulation of platinum and palladium futures settlement prices. Using benchmarks from parallel electronic markets, we find that the manager's market-on-close trading causes significant settlement price artificiality. Defying predictions that competition among floor traders should limit any artificiality, the artificiality increases in the second half of the alleged manipulation period. Between 35% and 52% of the latter-period artificiality is directly attributable to noncompetitive floor prices. Inflated floor volume contributes a similar proportion to artificiality via the exchange's trade-weighted settlement price formula. We estimate that floor counterparties reaped more than $6.0 million in excess profits.

The impact of trading floor closure on market efficiency: evidence from the Toronto Stock Exchange

On 23 April 1997, the Toronto Stock Exchange closed its trading floor, making it at that time the second-largest stock exchange in North America to choose a purely electronic trading environment for its equities. Exploiting this natural experiment, we find that the move to electronic trading resulted in a higher cost of immediacy (bid–ask spreads), increased information asymmetry and an overall deterioration of short-horizon return predictability from past order flows, reducing the efficiency of price discovery. Our results suggest that the human element plays an important role in order execution and complements automated electronic trading by improving the efficiency of incorporating new information into prices.

The Impact of Trading Floor Closure on Market Efficiency: Evidence from the Toronto Stock Exchange

On 23 April 1997, the Toronto Stock Exchange closed its trading floor, making it at that time the second-largest stock exchange in North America to choose a purely electronic trading environment for its equities. Exploiting this natural experiment, we find that the move to electronic trading resulted in a higher cost of immediacy (bid–ask spreads), increased information asymmetry and an overall deterioration of short-horizon return predictability from past order flows, reducing the efficiency of price discovery. Our results suggest that the human element plays an important role in order execution and complements automated electronic trading by improving the efficiency of incorporating new information into prices.

Forensic, pharmaceutical and criminalistics examination of the facts of murders committed by women in intoxicated state

In Ukraine from the very beginning people thought, that the woman is the homemaker, wealth, inheritance, child health and gene pool of the nation, which is the foundation of a healthy family and society. Therefore, from a woman, of her health, the opportunity to realize their aspirations in the implementation of labor and social activities depends on the health of each individual family and society as a whole. In recent decades, the role of women has changed: a mother and homemaker, she has become an active public figure that feels high physical and psychological pressure. Recent research and publication analysis. According to researches of the Sosin I.K., Linsky I.V., Minko A.I., Voloshin P.V., Maruta N.O., Chuev Y.F., Melnik A.V. on the examples of clinical practice proved that the female body is weaker than men’s and, unlike the latter, not accustomed to long and excessive abuse of alcohol. That is why addiction to substances among women faster than men's behavior while intoxicated – aggressive and treatment of female alcoholism and drug addiction are longer and harder. Paper objective. The aim of the paper was to study the statistical data from the WHO and the Department of Healthcare of Kharkiv Regional State Administration regarding the incidence of alcoholism among young people in the European Union and the level of alcohol consumption among women in Ukraine, the study of forensic and pharmaceutical facts concerning the murders committed by women in intoxicated state and on the examples to show the damage that causes irregular drink of alcohol to the human and its associates, generalization of legal acts and proposals to reduce alcohol circulation and increase the women's access to certain types of drugs. Paper main body. Based on examples from forensic and pharmaceutical practice found that women in drunk state commit illegal acts that are criminal offenses resulting in suffering her family and children, and the state holds the social and financial burden and severe financial losses aimed at its treatment and medical supply all legal classification groups. According to the results of forensic and psychiatric research by the Linsky I.V., Minko A.I. and Shapovalov Val.V. established causal relationships and positive relationship between the number of alcoholic psychoses, drug-addicts and the number of crimes committed on the territory of Ukraine in general and in the Kharkiv region in particular. That is, women with signs of alcohol dependence, and continued abusing of the psychoactive substance alcohol are often the victims or perpetrators of various offenses committed by intoxicated. Conclusions of the research. Forensic and pharmaceutical examination of the facts of murders committed by women in drunk state based on criminalistics principles shows that in Ukraine acute problem of female alcoholism. In addition, the problem is acute in the EU and the Middle East, both for men and women. Therefore, its solution is in the plane of the improvement of legislation to limit access to alcohol for the population of Ukraine as an example of Muslim countries. Experience in other countries shows the need for amendments to certain laws of Ukraine, which would impose a limitation commercial promotion of alcoholic beverages during the day, namely a ban on the sale from 9.00 pm to 9.00 am; prohibition of placing windows, shelves with alcohol on a trading floors, along with other products, they should be placed in a secluded room, access to which is restricted to certain categories of people. Also needed the further development of interdisciplinary connections between criminal law, criminology, medical and pharmaceutical law.