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Implementation Details for Frequent Batch Auctions: Slowing Down Markets to the Blink of an Eye

Author

Listed:
  • Eric Budish
  • Peter Cramton
  • John Shim

Abstract

Our recent research (Budish, Cramton, and Shim 2013) proposes frequent batch auctions—uniform-price sealed-bid double auctions conducted at frequent but discrete time intervals—as a market design alternative to continuous-time trading in financial markets. This short paper discusses the implementation details of frequent batch auctions. We outline the process flow for frequent batch auctions, discuss a modification to the market design that accommodates market fragmentation and Reg NMS, and discuss the engineering and economic considerations relevant for determining the batch interval. Open questions are discussed throughout.

Suggested Citation

  • Eric Budish & Peter Cramton & John Shim, 2014. "Implementation Details for Frequent Batch Auctions: Slowing Down Markets to the Blink of an Eye," American Economic Review, American Economic Association, vol. 104(5), pages 418-424, May.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:5:p:418-24
    Note: DOI: 10.1257/aer.104.5.418
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    File URL: http://www.aeaweb.org/aer/ds/10405/P2014_1093_ds.zip
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    References listed on IDEAS

    as
    1. Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, Econometric Society, vol. 70(4), pages 1341-1378, July.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Financial transactions taxes: FTT?
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2015-10-26 17:22:04

    Citations

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    Cited by:

    1. Craig W. Holden & Stacey Jacobsen & Avanidhar Subrahmanyam, 2014. "The Empirical Analysis of Liquidity," Foundations and Trends(R) in Finance, now publishers, vol. 8(4), pages 263-365, December.
    2. Frank Kelly & Elena Yudovina, 2015. "A Markov model of a limit order book: thresholds, recurrence, and trading strategies," Papers 1504.00579, arXiv.org, revised Mar 2017.
    3. Alasdair Brown & Fuyu Yang, 2015. "Adverse Selection, Speed Bumps and Asset Market Quality," University of East Anglia Applied and Financial Economics Working Paper Series 070, School of Economics, University of East Anglia, Norwich, UK..

    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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