The Role of Precision Timing in Stock Market Price Discovery when Trading through Distributed Ledgers
Authors
-
,GB
Daniel Broby -
,GBDevraj Basu
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,GBAshwin Arulselvan
DOI:
https://doi.org/10.18311/jbt/2019/23355Keywords:
Clearing, Coordinated Universal Time, Distributed Ledger, FinTech, High Frequency Trading, Precision Time, Price Discovery, Settlement, Stock Market, TimestampingAbstract
This paper investigates the importance of "time of execution” and the relevance of "precision time” in order driven transactions done over distributed ledgers. We created a distributed market place using stock market price data from the Toronto Stock Exchange (TMX). We then proceeded to test and measure the impact of timing of orders at the nanosecond level. Whilst price discovery in order driven markets is done instantaneously, with distributed markets, it is necessary to know which order to process first to avoid "front-running”. We argue that a protocol for the time of order of receipt and execution should be subject to nanosecond stacking. Our approach incorporates both transitory and permanent price discovery components. It allows for the efficient processing of transactions and the order that are received by a market clearing distributed ledger.
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All the articles published in JBT are distributed under a creative commons license. The journal allows the author(s) to hold the copyright of their work (all usages allowed except for commercial purpose).
Accepted 2019-02-25
Published 2019-07-04
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