Microeconomic foundation of investment decisions for electronic security trading systems [Elektronische Ressource] / vorgelegt von Li Xihao
122 Pages
English

Microeconomic foundation of investment decisions for electronic security trading systems [Elektronische Ressource] / vorgelegt von Li Xihao

Downloading requires you to have access to the YouScribe library
Learn all about the services we offer

Description

Microeconomic Foundation ofInvestment Decisions for ElectronicSecurity Trading SystemsInauguraldissertation zur Erlangung des Grades eines Doktorsder Wirtschaftsswissenschaften (Dr. rer. pol.) an der Fakult¨atfu¨r Wirtschaftswissenschaften der Universit¨at Bielefeldvorgelegt vonLi Xihao , M. Sc.May 21, 2010First Supervisor: Prof. Dr. Jan WenzelburgerCentre for Economic ResearchKeele UniversitySecond Supervisor: Prof. Dr. Herbert DawidDepartment of EconomicsBielefeld UniversityContentsIntroduction 11 Xetra Auction Market Mechanism 91.1 Demand and Supply Schedule . . . . . . . . . . . . . . . . . . . . 91.1.1 Demand-to-buy Schedule . . . . . . . . . . . . . . . . . . . 101.1.2 Supply-to-sell Schedule . . . . . . . . . . . . . . . . . . . . 121.2 Xetra Auction Price Mechanism . . . . . . . . . . . . . . . . . . . 141.2.1 Trading Volume and Surplus . . . . . . . . . . . . . . . . . 151.2.2 Xetra Auction Price Model . . . . . . . . . . . . . . . . . . 151.3 Xetra Auction Allocation Mechanism . . . . . . . . . . . . . . . . 191.3.1 Xetra Auction Allocation Model . . . . . . . . . . . . . . . 201.3.2 Properties of Xetra Auction Allocation Mechanism . . . . 212 Improvement on Auction Price Mechanism 252.1 Properties of Xetra Auction Price Mechanism . . . . . . . . . . . 252.2 Improvement on Auction Pricing Rules . . . . . . . . . . . . . . . 272.2.1 Equivalent Auction Pricing Rules . . . . . . . . . . . . . . 282.2.2 Improved Auction Pricing Rules . .

Subjects

Informations

Published by
Published 01 January 2010
Reads 10
Language English
Document size 1 MB

MicroeconomicFoundationof
InvestmentDecisionsforElectronic
SecurityTradingSystems

InauguraldissertationzurErlangungdesGradeseinesDoktors

derWirtschaftsswissenschaften(Dr.rer.pol.)anderFakulta¨t

fu¨rWirtschaftswissenschaftenderUniversita¨tBielefeld

vorgelegtvon

LiXihao,M.Sc.

May21,2010

FirstSupervisor:

SecondSupervisor:

Prof.Dr.JanWenzelburger
CentreforEconomicResearch
KeeleUniversity

Prof.Dr.HerbertDawid
DepartmentofEconomics
BielefeldUniversity

Contents

Introduction

1XetraAuctionMarketMechanism
1.1DemandandSupplySchedule....................
1.1.1Demand-to-buySchedule...................
1.1.2Supply-to-sellSchedule....................
1.2XetraAuctionPriceMechanism...................
1.2.1TradingVolumeandSurplus.................
1.2.2XetraAuctionPriceModel..................
1.3XetraAuctionAllocationMechanism................
1.3.1XetraAuctionAllocationModel...............
1.3.2PropertiesofXetraAuctionAllocationMechanism....

2ImprovementonAuctionPriceMechanism
2.1PropertiesofXetraAuctionPriceMechanism...........
2.2ImprovementonAuctionPricingRules...............
2.2.1EquivalentAuctionPricingRules..............
2.2.2ImprovedAuctionPricingRules...............

3InvestmentDecisioninXetraauctionmarket
3.1SecurityTradingProcess.......................
3.2XetraAuctionPriceandAllocation.................
3.2.1XetraAuctionPriceFunction................
3.2.2XetraAuctionAllocationFunction.............

i

1

990121415151910212

5252728233

7373932474

ii

CONTENTS

3.3ExpectedXetraAuctionPriceandAllocation...........49
3.3.1ExpectedXetraAuctionPriceFunction...........50
3.3.2ExpectedXetraAuctionAllocationFunction........51
3.4PortfolioSelectionProblem.....................51
3.4.1ComputationalProcess....................52

4XetraAuctionMarketSystem59
4.1Agent-basedModellingofEconomicSystem............59
4.1.1ConstructiveAspectsofEconomicSystem.........60
4.1.2ConstructiveAspectsofActiveEconomicEntity......62
4.1.3ConstructiveAspectsofPassiveEconomicEntity.....65
4.1.4IntegrativeFrameworkforACEModelling.........65
4.2ACEModelofXetraAuctionMarketSystem...........66
4.3MarketExperiment..........................78
4.3.1ExperimentalSetup......................78
4.3.2ExperimentalProcedure...................81
4.3.3ExperimentalResults.....................82

5ConcludingRemarks

Acknowledgement

Bibliography

Appendices

98

19

19

69

AComputationalProcessforXetraAuctionPricingRules97

BComputationalProcessforImprovedAuctionPricingRules99

CProofofProposition2.1

DProofofTheorem3.1

EResultsofStatisticalTest

301

701

111

eht

origin

fo

Dedicated

ym

ot

ym

aspiration

grandfather,

nad

philosophy

vi

OCTNNEST

Introduction

TheMasterstandingbyastream,said,‘Itpassesonjustlikethis,notceasingday
ornight!’—ChapterXVII,BookIX,ConfucianAnalects(Englishtranslation
byJamesLegge)

Inthelastcentury,oursocietyhasbeenexperiencingnewtidesoftechnological
revolutiontriggeredbyexplosiveapplicationofinformationandcommunication
technology.Theinnovationandapplicationofnewtechnologyinvokesprofound
inuencesontheevolutionofnancialmarkets.Sincethelastdecade,thead-
vancesofelectronicsecuritytradinghavebeenoneofthedominantcharacteristics
intheevolutionofnancialmarkets.Thecomprehensiveapplicationofelectronic
tradinginnancialmarketsforcesstockexchangestoadoptanewgenerationof
thesecuritytradingplatform-ElectronicSecurityTradingSystem,e.g.Xe-
tra(FrankfurtStockExchange),SETS(LondonStockExchange),andUniversal
TradingPlatform(NYSEEuronext).Securitymarketsinsomecountrieshave
beendominatedbyelectronicsecuritytradingsystems.Forexample,over90%
ofsecuritytransactionsinGermanyareexecutedbyXetraSystemoperatedby
FrankfurtStockExchange.
Therearethreemainadvantagesofusingelectronicsecuritytradingplatforms
insteadoftradingonconventionaloormarkets.First,electronicplatformspro-
videmorereal-timetradinginformationinthetradingprocess.Second,electronic
tradingplatformsaremoretransparentthanconventionaloormarkets.Secu-
ritypricesarestipulatedaccordingtowell-speciedtradingruleswhilemarket
makersinconventionaloormarketshaveconsiderableinuenceontheprice
determination.This‘black-box’argumentappliesinparticularforpriceswhich
arenegotiatedamongasmallnumberofdealers.Third,transactioncostsofelec-
tronicsecuritytradingplatformsareonaveragelowerthanthoseofconventional
oormarkets.

1

2

INTRODUCTION

Theseadvantagestogetherwiththecompetitionamongglobalstockexchanges
furtheracceleratetheprocessofestablishingelectronicsecuritytradingplatforms
inmanycountries.Forexample,withthereferencetotheelectronictrading
systemXetrainGermany,Chinahasstartedtolaunchanelectronictrading
platformcalledNewGenerationTradingSystems(NGTS).
Despitethepopularityofelectronicsecuritytradingsystems,littleisknownabout
themicroeconomicfoundationoftradingmechanismsinthesemarkets,e.g.see
Harris(1990),Huang&Stoll(1991),andO’Hara(1995).
Duetothelackofaproperformalizationoftradingmechanismsinelectronic
securitytradingsystems,eachelectronictradingplatformhasitsownsetoftrad-
ingrules,thus‘...itisneithereasynorusefultodescribehoweachtrading
mechanismworks.Butitispossibletodiscusstheoperationsofaspecicmecha-
nism,anddetail,atleastinprinciple,howmechanismofthattypeactuallywork.’
(O’Hara1995,p.9).Followingthisline,weconsideronespecicelectronicse-
curitytradingsystem,i.e.XetrasystemoperatedbyFrankfurtStockExchange.
TheocialbrochureGruppeDeutscheBo¨rse(2003)publishedbyFrankfurtStock
ExchangeprovidesacomprehensivedescriptionofXetramarketmodelwithan
explicitstipulationofcertaintradingrules.
AccordingtoGruppeDeutscheBo¨rse(2003),Xetraisanorder-drivensystem
inwhichtraderscantradesecuritieseitherintheformofcontinuoustradingor
intheformofXetraauctionbysubmittingcertaintypesoforderspecications
throughacomputerinterface.Acentralcomputersystemthencollectsorder
specicationsintoacentralorderbookanddeterminesthesecuritytradingprice
andthetradingvolumeaccordingtowell-speciedtradingrules.
TherearetwoordersizesinXetra,roundlotsandoddlots.Roundlotscorrespond
toaspeci