nep-mst New Economics Papers
on Market Microstructure
Issue of 2020‒11‒09
two papers chosen by
Thanos Verousis

  1. Analysis of the impact of maker-taker fees on the stock market using agent-based simulation By Isao Yagi; Mahiro Hoshino; Takanobu Mizuta
  2. Specilized day trading -- a new view on an old game By V Simovic; V Simovic

  1. By: Isao Yagi; Mahiro Hoshino; Takanobu Mizuta
    Abstract: Recently, most stock exchanges in the U.S. employ maker-taker fees, in which an exchange pays rebates to traders placing orders in the order book and charges fees to traders taking orders from the order book. Maker-taker fees encourage traders to place many orders that provide market liquidity to the exchange. However, it is not clear how maker-taker fees affect the total cost of a taking order, including all the charged fees and the market impact. In this study, we investigated the effect of maker-taker fees on the total cost of a taking order with our artificial market model, which is an agent-based model for financial markets. We found that maker-taker fees encourage market efficiency but increase the total costs of taking orders.
    Date: 2020–10
  2. By: V Simovic; V Simovic
    Abstract: After the U.S market earned strong returns in 2003, day trading made a comeback and once again became a popular trading method among traders. Although there is no comprehensive empirical evidence available to answer the question do individual day traders make money, there is a number of studies that point out that only few are able to consistently earn profits sufficient to cover transaction costs and thus make money. The day trading concept of buying and selling stocks on margin alone suggests that it is more risky than the usual going long way of making profit. This paper offers a new approach to day trading, an approach that eliminates some of the risks of day trading through specialization. The concept is that the trader should specialize himself in just one (blue chip) stock and use existing day trading techniques (trend following, playing news, range trading, scalping, technical analysis, covering spreads) to make money.
    Date: 2020–10

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