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Coming early to the party
(2017)
We examine the strategic behavior of High Frequency Traders (HFTs) during the pre-opening phase and the opening auction of the NYSE-Euronext Paris exchange. HFTs actively participate, and profitably extract information from the order flow. They also post "flash crash" orders, to gain time priority. They make profits on their last-second orders; however, so do others, suggesting that there is no speed advantage. HFTs lead price discovery, and neither harm nor improve liquidity. They "come early to the party", and enjoy it (make profits); however, they also help others enjoy the party (improve market quality) and do not have privileges (their speed advantage is not crucial).
Do competition and incentives offered to designated market makers (DMMs) improve market liquidity? Using data from NYSE Euronext Paris, we show that an exogenous increase in competition among DMMs leads to a significant decrease in quoted and effective spreads, mainly through a reduction in adverse selection costs. In contrast, changes in incentives, through small changes in rebates and requirements for DMMs, do not have any tangible effect on market liquidity. Our results are of relevance for designing optimal contracts between exchanges and DMMs and for regulatory market oversight.
This paper analyses whether the post-crisis regulatory reforms developed by global-standard-setting bodies have created appropriate incentives for different types of market participants to centrally clear Over-The-Counter (OTC) derivative contracts. Beyond documenting the observed facts, we analyze four main drivers for the decision to clear: 1) the liquidity and riskiness of the reference entity; 2) the credit risk of the counterparty; 3) the clearing member’s portfolio net exposure with the Central Counterparty Clearing House (CCP) and 4) post trade transparency. We use confidential European trade repository data on single-name Sovereign Credit Derivative Swap (CDS) transactions, and show that for all the transactions reported in 2016 on Italian, German and French Sovereign CDS 48% were centrally cleared, 42% were not cleared despite being eligible for central clearing, while 9% of the contracts were not clearable because they did not satisfy certain CCP clearing criteria. However, there is a large difference between CCP clearing members that clear about 53% of their transactions and non-clearing members, even those that are subject to counterparty risk capital requirements, that almost never clear their trades. Moreover, we find that diverse factors explain clearing members’ decision to clear different CDS contracts: for Italian CDS, counterparty credit risk exposures matter most for the decision to clear, while for French and German CDS, margin costs are the most important factor for the decision. Clearing members use clearing to reduce their exposures to the CCP and largely clear contracts when at least one of the traders has a high counterparty credit risk.
We study whether the presence of low-latency traders (including high-frequency traders (HFTs)) in the pre-opening period contributes to market quality, defined by price discovery and liquidity provision, in the opening auction. We use a unique dataset from the Tokyo Stock Exchange (TSE) based on server-IDs and find that HFTs dynamically alter their presence in different stocks and on different days. In spite of the lack of immediate execution, about one quarter of HFTs participate in the pre-opening period, and contribute significantly to market quality in the pre-opening period, the opening auction that ensues and the continuous trading period. Their contribution is largely different from that of the other HFTs during the continuous period.
We show that High Frequency Traders (HFTs) are not beneficial to the stock market during flash crashes. They actually consume liquidity when it is most needed, even when they are rewarded by the exchange to provide immediacy. The behavior of HFTs exacerbate the transient price impact, unrelated to fundamentals, typically observed during a flash crash. Slow traders provide liquidity instead of HFTs, taking advantage of the discounted price. We thus uncover a trade-o↵ between the greater liquidity and efficiency provided by HFTs in normal times, and the disruptive consequences of their trading activity during distressed times.
This paper empirically analyses whether post-global financial crisis regulatory reforms have created appropriate incentives to voluntarily centrally clear over-the-counter (OTC) derivative contracts. We use confidential European trade repository data on single-name sovereign credit default swap (CDS) transactions and show that both seller and buyer manage counterparty exposures and capital costs, strategically choosing to clear when the counterparty is riskier. The clearing incentives seem particularly responsive to seller credit risk, which is in line with the notion that counterparty credit risk (CCR) is asymmetric in CDS contracts. The riskiness of the underlying reference entity also impacts the decision to clear as it affects both CCR capital charges for OTC contracts and central counterparty clearing house (CCP) margins for cleared contracts. Lastly, we find evidence that when a transaction helps netting positions with the CCP and hence lower margins, the likelihood of clearing is higher.
Accurate neutron capture cross section data for minor actinides (MAs) are required to estimate the production and transmutation rates of MAs in light water reactors with a high burnup, critical fast reactors like Gen-IV systems and other innovative reactor systems such as accelerator driven systems (ADS). Capture reactions of 244Cm open the path for the formation of heavier Cm isotopes and of heavier elements such as Bk and Cf. In addition, 244Cm shares nearly 50% of the total actinide decay heat in irradiated reactor fuels with a high burnup, even after three years of cooling.
Experimental data for this isotope are very scarce due to the difficulties of providing isotopically enriched samples and because the high intrinsic activity of the samples requires the use of neutron facilities with high instantaneous flux. The only two previous experimental data sets for this neutron capture cross section have been obtained in 1969 using a nuclear explosion and, more recently, at J-PARC in 2010. The neutron capture cross sections have been measured at n_TOF with the same samples that the previous experiments in J-PARC. The samples were measured at n_TOF Experimental Area 2 (EAR-2) with three C6D6 detectors and also in Experimental Area 1 (EAR-1) with the Total Absorption Calorimeter (TAC). Preliminary results assessing the quality and limitations of these new experimental datasets are presented for the experiments in both areas. Preliminary yields of both measurements will be compared with evaluated libraries for the first time.
The neutron capture cross section of 154Gd was measured from 1 eV to 300 keV in the experimental area located 185 m from the CERN n_TOF neutron spallation source, using a metallic sample of gadolinium, enriched to 67% in 154Gd. The capture measurement, performed with four C6D6 scintillation detectors, has been complemented by a transmission measurement performed at the GELINA time-of-flight facility (JRC-Geel), thus minimising the uncertainty related to sample composition. An accurate Maxwellian averaged capture cross section (MACS) was deduced over the temperature range of interest for s process nucleosynthesis modelling. We report a value of 880(50) mb for the MACS at kT = 30 keV, significantly lower compared to values available in literature. The new adopted 154Gd(n,γ) cross section reduces the discrepancy between observed and calculated solar s-only isotopic abundances predicted by s-process nucleosynthesis models.
We have measured the γ-rays following neutron capture on 240Pu and 244 Cm at the n_TOF facility at CERN with the Total Absorption Calorimeter (TAC) and with C6D6 organic scintillators. The TAC is made of 40 BaF2 crystals operating in coincidence and covering almost the entire solid angle. This allows to obtain information concerning the energy spectra and the multiplicity of the measured capture γ-ray cascades. Additional information is also obtained from the C6D6 detectors. We have analyzed the measured data in order to draw conclusions about the Photon Strength Functions (PSFs) of 241Pu and 245Cm below their neutron separation energies. The analysis has been performed by fitting the PSFs to the experimental results, using the differential evolution method, in order to find neutron capture cascades capable of reproducing at the same time a great variety of deposited energy spectra.