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Auction Market System in Electronic Security Trading Platform

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  • Li, Xi Hao

Abstract

Under the background of the electronic security trading platform Xetra operated by Frankfurt Stock Exchange, we consider the Xetra auction market system (XAMS) from `bottom-up', which the interaction among heterogeneous traders and Xetra auction market mechanism generates non-equilibrium price dynamics. First we develop an integrative framework that serves as general guidance for analyzing the economic system from `bottom-up' and for seamlessly transferring the economic system into the corresponding agent-based model. Then we apply this integrative framework to construct the agent-based model of XAMS. By conducting market experiments with the computer implementation of the agent-based model of XAMS, we investigate the role of the price setter who assumes its trading behavior can manipulate the market price. The main finding is that the introduction of the price setter in the setting of XAMS improves market efficiency while does not significantly influence price volatility of the market.

Suggested Citation

  • Li, Xi Hao, 2012. "Auction Market System in Electronic Security Trading Platform," MPRA Paper 43183, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43183
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    File URL: https://mpra.ub.uni-muenchen.de/43183/1/MPRA_paper_43183.pdf
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    References listed on IDEAS

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    1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
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    More about this item

    Keywords

    agent-based modelling; computational market experiment; electronic security trading platform; Xetra; non-equilibrium priced ynamics; automatic trading;

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • G1 - Financial Economics - - General Financial Markets
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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