Can Algorithms Learn to Manipulate the Order Book in Electronic Markets?
Speaker:
Álvaro Cartea, University of Oxford
Date and Time:
Wednesday, September 27, 2023 - 2:00pm to 3:00pm
Location:
Fields Institute, Room 230
Abstract:
We propose a tractable one-tick model of the limit order book to characterize when an algorithm will learn to spoof the order book if decision making is delegated to a learning algorithm. We obtain simple testable conditions that depend only on the model parameters and are easy to estimate. Applying the testable conditions to empirical data, we find that market conditions from Nasdaq are conducive for an algorithm to learn to spoof the order book.