Sergey Osmekhin Essays on Algorithmic Trading 297

ural experiment of unifying the tariff structure of the NASDAQ OMX Nordic exchange trading price lists. I test the hypothesis that if the change of the exchange fees is less than uncertainties of other trading costs (e.g. cost of future bid-ask spread), the impact of the change is economically insignificant. The third essay presents a quantitative approach to measure market efficiency, based on the waiting time distribution. Constructing mean-reverting portfolios of crosslisted stocks provides observation of inefficient states by divergence of price from its mean. The farther the price diverges from its mean, the quicker the mean-reversion is. The essay shows that the parameter of the waiting-time exponential distribution is a good indicator of market efficiency. The findings presented in the thesis have the potential to be of interest for investors, regulators, and policy makers internationally.

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Sergey Osmekhin – Essays on Algorithmic Trading

Financial markets and the pace of trading have changed dramatically over the last decade. Stock exchanges have replaced their traditional physical floors with electronic trading platforms. Most market participants now employ automated, algorithmic strategies, which are the focus of the present thesis. The thesis consists of introduction and three essays. In the first essay, I study the impact of algorithmic trading activity on market properties. The analysis is based on a proprietary dataset from NASDAQ OMX Nordic. The essay presents a method for causality identification that does not rely on exogenous events. Separating maker’s and taker’s activity provides the analysis of causality between traders and market properties. The results identify two-way causality from the activity of algorithmic liquidity providers to relative bid-ask spread and from bid-ask spread to the activity of algorithmic liquidity takers. In the second essay, I study the impact of trading fees on market properties and activity of traders using the nat-

ekonomi och samhälle Economics and Society

Essays on Algorithmic Trading Sergey Osmekhin

Ekonomi och samhälle Economics and Society Skrifter utgivna vid Svenska handelshögskolan Publications of the Hanken School of Economics

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Sergey Osmekhin

Essays on Algorithmic Trading

Helsinki 2016