Drs. Jain and McInish recently accepted for publication in the Journal of Financial Markets

For release:  February 24, 2017

Dr. Pankaj K. Jain, interim chair of the Department of Finance, Insurance, and Real Estate, and Dr. Thomas McInish, Wunderlich Chair of Excellence and professor of Finance, recently co-authored a paper with Dr. Pawan Jain, professor at University of Wyoming and FCBE doctoral alumnus. Their paper was published in the Journal of Financial Markets, the leading publication outlet for market microstructure academic research. The paper, entitled "Does High-Frequency Trading Increase Systemic Risk?," has also recently been highlighted by Columbia Law School here. Previously, the paper won the Outstanding Paper in Investments Award by Eastern Finance Association and the Best Paper Award (First Prize) in the Conference on Excellence in Research and Education at IIM Indore.

The Tokyo Stock Exchange, the largest stock exchange headquartered outside of the United States, introduced a new trading platform, Arrowhead. This platform was designed to reduce latency and increase co-located, high-frequency quoting and trading (HFQ) from zero to 36% of trading volume. During tail events representing extreme market conditions, low-latency correlated HFQ may lead to systemic risks such as flash crashes, which has not been sufficiently addressed in the literature. In this paper, the study provides a framework to assess whether HFQ increases systemic risks and point to the need for incorporating correlations and CoVaR methods in regulating these risks through circuit breakers and other regulations.

The paper was also presented at the National Stock Exchange of India, IIM Bangalore, IGIDR annual conference (organized by Reserve Bank of India and SEBI), the University of Mississippi seminar presentation, the Kakatiya University in Turkey seminar presentation, Financial Management Association doctoral consortium presentation, Midwest Finance Association meeting presentation, and the U.S. Securities and Exchange Commission brown bag seminar.