High-frequency trading and regulatory policies. A tale of market stability vs. market resilience

by Sandrine Jacob Leal and Mauro Napoletano

Over the past decades, high-frequency trading (HFT) has sharply increased in US and European markets. HFT represents a major challenge for regulatory authorities, partly because it encompasses a wide array of trading strategies (AFM (2010); SEC, 2010), and partly because of the big uncertainty yet surrounding the net benefits it has for financial markets (Lattemann and al. (2012); ESMA (2014); Aguilar, 2015). Continue reading “High-frequency trading and regulatory policies. A tale of market stability vs. market resilience”

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Rock around the Clock: an explanation of flash crashes

Sandrine Jacob Leal,[1] Mauro Napoletano,[2] Andrea Roventini,[3]  Giorgio Fagiolo[4]

On May 6 2010, contemporaneously with the unprecedented price decrease of the E-Mini S&P500[5], many US equity indices, including the Dow Jones Industrial Average, nosedived by more than 5% in few minutes, before recovering much of the loss. During this “flash crash”, most asset prices lost any informational role, as over 20,000 trades across more than 300 securities were executed at prices more than 60% away from their values just moments before. Many were executed at prices of a $0.01 or less, or as high as $100,000, before prices of those securities returned to their “pre-crash” levels (CFTC and SEC, 2010). Continue reading “Rock around the Clock: an explanation of flash crashes”

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The financial markets: Sword of Damocles of the presidential election

By Céline Antonin

Although some of the candidates may deny it, the financial risk linked to the fiscal crisis in the euro zone is the guest of honour at the presidential campaign. As proof that this is a sensitive issue, the launch in mid-April of a new financial product on French debt crystallized concerns. It must be said that this took place in a very particular context: the Greek default showed that the bankruptcy of a euro zone country had become possible. Despite the budgetary firewalls in place since May 2010 (including the European Financial Stability Fund), some of France’s neighbours are facing a lack of confidence from the financial markets, which is undermining their ability to meet their commitments and ensure the fiscal sustainability of their government debt, the most worrying example to date being Spain. What tools are available to speculators to attack a country like France, and what should be feared in the aftermath of the presidential election? Continue reading “The financial markets: Sword of Damocles of the presidential election”

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Why the developed countries should renounce their AAA rating

By Catherine Mathieu and Henri Sterdyniak

By their very nature, states with monetary sovereignty should renounce their AAA rating: indeed, what is the logic behind having the rating agencies rate a state whose default is rendered impossible by its ability to create its own money? To avoid dependence on the rating agencies and put an end to the crisis in Europe, the Member States of the euro zone must recover their monetary sovereignty through the joint, virtually complete guarantee of their public debts. Continue reading “Why the developed countries should renounce their AAA rating”

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