Decision Sciences
2 years ago

New market rules could revolutionize liquidity provision in financial exchanges

arXiv (Cornell University)
Designating market maker behaviour in Limit Order Book markets
Efstathios Panayi, Gareth W. Peters, Jón Danı́elsson, Jean‐Pierre Zigrand

Paper Summary

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Market makers in financial exchanges may not always provide liquidity when it is most needed. To address this, a new method using TED is proposed to measure how quickly market makers replenish liquidity. By analyzing the state of the market, researchers found the best way to set target levels for market makers to ensure liquidity is available when needed.