Minimum quote life and maximum order message-to-trade ratio

Minimum quote life and maximum order message-to-trade ratio
Document type
Impact Assessment
Author(s)
Brogaard, Jonathan
Publisher
BIS
Date of publication
1 November 2011
Series
Economic Impact Assessment EIA1
Subject(s)
Trends: economic, social and technology trends affecting business
Collection
Business and management
Material type
Reports

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An impact assessment is presented for proposals to introduce rules to financial markets declaring a minimum order existence time and/or a maximum number of order messages sent per actual trade. These are alternative measures to deal with problems in financial markets where the number and frequency of speculative offers to sell or requests to buy assets at specific prices is thought to cause prices to change too rapidly for human investors to be able to respond to, to cause liquidity problems, to potentially send the number of messages sent above the technical capacity of communications systems to deal with expeditiously, and to allow potential underhand market manipulation. The potential advantages and disadvantages of both measures are discussed. It is concluded that it is currently impossible to conclude that the benefits of either measure would outweigh the costs.

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