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Future of computer trading

From:
Government Office for Science
First published:
23 October 2012

Foresight project exploring how computer generated trading in financial markets will change between now and 2022.

Advances in technology are transforming how our financial markets operate. The volume of financial products traded through computer automated trading taking place at high speed and with little human involvement has increased dramatically in the past few years.

Today, over one-third of UK equity trading volume is generated through high frequency automated computer trading while in the US this figure is closer to three-quarters.

This project examined the technological advances which have transformed market structures in recent years and explored how computer trading will evolve over the next 10 years.

Sir John Beddington talks about the new Foresight report on the future of computer trading

View more videos on the project.

The project involved 150 leading experts from more than 20 countries to provide the best possible analysis on computer trading to date. Over 50 driver reviews, working papers, economic impact assessments and surveys informed the final report.

It was guided by a high level stakeholder group and a lead group of experts to provide strategic oversight of the project and ensure that it used the most relevant evidence and research.

The project was sponsored by HM Treasury.

Project report

  1. Future of computer trading in financial markets: an international perspective

    • Research and analysis

Working papers

  1. Future of computer trading in financial markets: MiFID II - working paper

    • Research and analysis

  2. Future of computer trading in financial markets: working paper

    • Research and analysis

Driver reviews

  1. Computer trading: UK equity market - the last 10 years

    • Research and analysis

  2. Computer trading: feedback effects and changes in trading strategies

    • Research and analysis

  3. Computer trading: technology trends

    • Research and analysis

  4. Computer trading: global financial markets

    • Research and analysis

  5. Computer trading: liquidity and trading costs

    • Research and analysis

  6. Computer trading: an ecological perspective

    • Research and analysis

  7. Computer trading: crashes and high frequency trading

    • Research and analysis

  8. Computer trading: automated analysis of news

    • Research and analysis

  9. Computer trading: leverage, forced asset sales, and market stability

    • Research and analysis

  10. Computer trading: information and profits

    • Research and analysis

  11. Computer trading: impersonal efficiency and the dangers of a fully automated securities exchange

    • Research and analysis

  12. Computer trading: price efficiency

    • Research and analysis

  13. Computer trading: interactions between human traders and algorithmic trading systems

    • Research and analysis

  14. Computer trading: large scale financial systems simulation

    • Research and analysis

  15. Computer trading: impact of special relativity on securities regulation

    • Research and analysis

  16. Computer trading: market structure

    • Research and analysis

  17. Computer trading: evolution of algorithmic classes

    • Research and analysis

  18. Computer trading: pricing liquidity in electronic markets

    • Research and analysis

  19. Computer trading: market fragmentation in Europe

    • Research and analysis

  20. Computer trading: market abuse

    • Research and analysis

  21. Computer trading: execution costs of institutional investors

    • Research and analysis

  22. Computer trading: end of day manipulation

    • Research and analysis

  23. Computer trading: changes in firms' equity capital

    • Research and analysis

  24. Computer trading: impact on market integrity

    • Research and analysis

  25. Computer trading: 'robot phase transition' in experimental human algorithmic markets

    • Research and analysis

  26. Computer trading: systemic risk - a nuclear perspective

    • Research and analysis

  27. Computer trading: quantifying instabilities and risks

    • Research and analysis

  28. Computer trading: impact on market efficiency and integrity

    • Research and analysis

  29. Computer trading: systemic risk

    • Research and analysis

  30. Computer trading: trust and reputation in financial services

    • Research and analysis

  31. Computer trading: standards

    • Research and analysis

Economic impact assessments

  1. Computer trading: minimum quote life and maximum order message-to-trade ratio

    • Impact assessment

  2. Computer trading: minimum resting times and transaction-to-order ratios

    • Impact assessment

  3. Computer trading: minimum resting times vs call markets and circuit breakers

    • Impact assessment

  4. Computer trading: stock market circuit breakers

    • Impact assessment

  5. Computer trading: tick size regulation

    • Impact assessment

  6. Computer trading: tick size regulation - costs, benefits and risks

    • Impact assessment

  7. Computer trading: minimum obligations of market makers

    • Impact assessment

  8. Computer trading: impact of circuit breakers on market outcomes

    • Impact assessment

  9. Computer trading: impact of internalisation on the quality of displayed liquidity

    • Impact assessment

  10. Computer trading: continuous market vs randomised stop auctions and alternative priority rules

    • Impact assessment

  11. Computer trading: maker taker pricing and high frequency trading

    • Impact assessment

  12. Computer trading: a central limit order book for European stocks

    • Impact assessment

  13. Computer trading: regulatory scrutiny of algorithmic trading systems

    • Impact assessment

  14. Computer trading: market abuse and surveillance

    • Impact assessment

  15. Computer trading: order to trade ratios and the Italian stock market

    • Impact assessment

  16. Computer trading: market making obligations and algorithmic trading systems

    • Impact assessment

  17. Computer trading: harmonized circuit breakers

    • Impact assessment

  18. Computer trading: economic impact of MiFID rules on high frequency trading

    • Impact assessment

  19. Computer trading: economic impact of MiFID II proposals on computer trading

    • Impact assessment

Interviews and surveys

  1. Computer trading: interviews with computer-based traders

    • Research and analysis

  2. Computer trading: investors' views

    • Research and analysis

Workshop reports

  1. Computer trading: industry workshops - drivers of change and scenarios

    • Research and analysis

  2. Computer trading: future of equity market structures

    • Research and analysis

  3. Computer trading: chief economist workshop - drivers of change and scenarios

    • Research and analysis

Scenarios

  1. Future of computer trading in financial markets: scenarios

    • Research and analysis

Announcements

  1. Foresight report on computer trading shows benefits to financial markets but calls for joint action to manage risks

    • Press release

  2. Foresight research on computer trading assesses proposed MiFID II policy measures related to computer trading in financial markets

    • Press release

  3. HM Treasury and Chief Scientist meet with key financial figures to discuss the future of computer trading

    • Press release

  4. Dame Clara Furse appointed as chair of lead expert group for latest Foresight project

    • Press release

  5. Government explores the future challenges and opportunities of computer trading in financial markets

    • Press release

Document information

Published: 23 October 2012

From: Government Office for Science