Market Matters
Do High Frequency Trading Firms Provide Two-sided Liquidity?
Paper Presentation in a Themed Session Deniz Ozenbas
High Frequency Trading (HFT) firms are commonly thought of as the new market makers although, unlike traditional dealers, they have no affirmative obligation to make fair and orderly markets. We investigate the quality of HFT provided liquidity by focusing on whether HFT firms make, with reasonable consistency, two-sided markets. We us Sarkar and Schwartz’s (2009) sidedness metric to quantify the contributions of both HFT and non-HFT firms to liquidity. In so doing, we pay attention to liquidity provision by the HFTs during relatively normal periods versus more stressful, challenging periods. We use the intra-day data of all trades and quotes for 120 stocks, out of which forty are large-cap, forty are mid-cap, and forty are small-cap stocks. The data, obtained from NASDAQ, identify whether each trade and quote comes from an HFT firm or from a non-HFT firm, whether the HFT/non-HFT was the side providing liquidity, and whether it was a buyer or seller initiated trade. Our study period includes the calendar years 2008 and 2009. Results Regarding magnitude, we find, for large-cap stocks, that the liquidity provided by HFT trading is slightly less than that provided by non-HFT trading (46% versus 54% respectively), and that HFT liquidity provision is markedly lower for mid-cap stocks (21% versus 79%, respectively). Sidedness, however, is a different story. For both large cap and more volatile stocks, HFT liquidity provision is predominantly two-sided, even during very short (one-minute) measurement intervals, and it increases as the measurement interval is lengthened. In contrast, non-HFT trading during one-minute intervals is one-sided for all cap sizes and all volatility levels. Hence, while our findings with regard to the aggregate level of liquidity provision are more positive for the non-HFT traders, the quality of sidedness provision favors the HFT firms. For the large caps, HFTs continue to provide two-sided liquidity at the more challenging times of the trading day, namely, the opening and the closing half-hour periods, albeit both the level and the significance of their two-sidedness is lower compared to what we observe for the entire trading day. Moreover, for mini-flash crashes that take place within seconds, liquidity provision by HFTs drops precipitously, particularly for large cap stocks. Thus, while there is merit to characterizing HFTs as the “new market makers,” they appear to be selective in terms of the conditions under which they contribute to markets.
Corporate Social Responsibility in the Mexican Oil Industry: A Real Contributor to Local Development?
Paper Presentation in a Themed Session Armando Garcia-Chiang
For more than seven decades an “oil-nationalism” has existed in Mexico, which is particularly expressed in the national oil company Mexican Petroleum, which had a monopoly on the exploration, drilling, transportation, processing and distribution of hydrocarbons. However, the last two years has given rise to a process of opening the Mexican oil industry to private participation, which, at least, in the mature fields may represent an alternative to increase the production of crude oil and a choice for local development, due to the obligation to implement concrete social, productive, and educational actions funded by companies, which must be based on a study of social impact. This work is divided into four sections, developing the idea that the passage of oil exploration and oil exploitation into private hands is not necessarily a negative. The first of these points deals with the evolution of the comprehensive contracts concerning the exploration and production of oil. The second deals with the relationship between energy reform and the widening of the field of studies of social impact. The third section deals with the relationship of these social impact studies with local development. Finally, the fourth section addresses a way to established linkages between universities and enterprises that could develop social responsibility schemes that can contribute to local development.
Environmental Impacts of Electricity Market Privatization : The Case of Turkey
Paper Presentation in a Themed Session Nur Kaman
Electricity, provided by states in general and with public service understanding as a monopoly until the 1980’s was privatized with globalization and started to be sold by companies according to market conditions. Due to the constant increase in demand for electricity, companies are putting pressure on governments for the unlimited use of natural resources for electricity generation. Considerable environmental damage occurs during the process of removing raw materials such as coal, petroleum, natural gas from underground or converting these raw materials to electric energy. Even hydroelectric power plants, which are among the renewable energy sources, can cause environmental degradation because of unlimited and uncontrolled production. In the areas where natural resources are excluded and in the power plants where electricity production is carried out, the environmental damage is embodied on the local scale as deforestation, the disappearance of agricultural land, and water and air pollution. On the global scale, the chain reaction leads to the degradation of the ecological balance of the whole world. In this study, the environmental impact of the preferred and encouraged use of fossil fuels in electricity generation in Turkey will be evaluated by analyzing the framework of national and international legislation and judicial decisions.
The Global Impact of United States’ Recent Policy Decisions
Paper Presentation in a Themed Session John Alsup
The United States has recently made several major policy decisions motivated by economic welfare and national security. Among these are leaving the Transpacific Partnership, threatening to impose international tariffs, withdrawing from the Paris Climate Accord and the Iran Nuclear Agreement, and moving the United States embassy to Jerusalem. In general, the international community does not support these decisions. This study investigates the global impact of these recent decisions, seeks to determine if they are based on a comprehensive and cohesive political and economic strategy, and inquires to what extent the United States will achieve what it desires.
