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Time Matters: Exploring the Effects of Urgency and Reaction Speed in Automated Traders

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Agents and Artificial Intelligence (ICAART 2020)

Part of the book series: Lecture Notes in Computer Science ((LNAI,volume 12613))

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Abstract

We consider issues of time in automated trading strategies in simulated financial markets containing a single exchange with public limit order book and continuous double auction matching. In particular, we explore two effects: (i) reaction speed - the time taken for trading strategies to calculate a response to market events; and (ii) trading urgency - the sensitivity of trading strategies to approaching deadlines. Much of the literature on trading agents focuses on optimising pricing strategies only and ignores the effects of time, while real-world markets continue to experience a race to zero latency, as automated trading systems compete to quickly access information and act in the market ahead of others. We demonstrate that modelling reaction speed can significantly alter previously published results, with simple strategies such as SHVR outperforming more complex adaptive algorithms such as AA. We also show that adding a pace parameter to ZIP traders (ZIP-Pace, or ZIPP) can create a sense of urgency that significantly improves profitability.

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Notes

  1. 1.

    In this paper, we use BSE version dated 22/07/18, with commit hash: c0b6a1080b6f0804a373dbe430e34d062dc23ffb.

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Authors and Affiliations

  1. Department of Computer Science, University of Bristol, Bristol, UK

    Henry Hanifan, Ben Watson, John Cartlidge & Dave Cliff

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  1. Henry Hanifan
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  2. Ben Watson
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  3. John Cartlidge
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  4. Dave Cliff
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Correspondence to John Cartlidge .

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Editors and Affiliations

  1. LIACC, University of Porto, Porto, Portugal

    Ana Paula Rocha

  2. ICREA, Institute of Evolutionary Biology, Barcelona, Spain

    Luc Steels

  3. Leiden University, Leiden, The Netherlands

    Jaap van den Herik

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Hanifan, H., Watson, B., Cartlidge, J., Cliff, D. (2021). Time Matters: Exploring the Effects of Urgency and Reaction Speed in Automated Traders. In: Rocha, A.P., Steels, L., van den Herik, J. (eds) Agents and Artificial Intelligence. ICAART 2020. Lecture Notes in Computer Science(), vol 12613. Springer, Cham. https://doi.org/10.1007/978-3-030-71158-0_7

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  • DOI: https://doi.org/10.1007/978-3-030-71158-0_7

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