arXiv · arXiv q-fin · 2026
This study strengthens the foundations of multi-venue market modeling by attempting an independent replication of Wah and Wellman's 2016 model of latency arbitrage in a fragmented market. We find that faithful replication is hindered by missing implementation details in the original paper and limited quantitative reporting. We demonstrate that increasing the number of simulation runs beyond the original design allows…
Ethan Ratliff-Crain, Colin M. Van Oort, Matthew T. K. Koehler, Brian F. Tivnan
arXiv · arXiv q-fin · 2021
In light of micro-scale inefficiencies induced by the high degree of fragmentation of the Bitcoin trading landscape, we utilize a granular data set comprised of orderbook and trades data from the most liquid Bitcoin markets, in order to understand the price formation process at sub-1 second time scales. To achieve this goal, we construct a set of features that encapsulate relevant microstructural information over sho…
Jakob Albers, Mihai Cucuringu, Sam Howison, Alexander Y. Shestopaloff
arXiv · arXiv q-fin · 2019
Technological progress is leading to proliferation and diversification of trading venues, thus increasing the relevance of the long-standing question of market fragmentation versus consolidation. To address this issue quantitatively, we analyse systems of adaptive traders that choose where to trade based on their previous experience. We demonstrate that only based on aggregate parameters about trading venues, such as…
Aleksandra Alorić, Peter Sollich
arXiv · arXiv q-fin · 2019
Using the most comprehensive source of commercially available data on the US National Market System, we analyze all quotes and trades associated with Dow 30 stocks in 2016 from the vantage point of a single and fixed frame of reference. We find that inefficiencies created in part by the fragmentation of the equity marketplace are relatively common and persist for longer than what physical constraints may suggest. Inf…
Brian F. Tivnan, David Rushing Dewhurst, Colin M. Van Oort, John H. Ring, Tyler J. Gray
arXiv · arXiv q-fin · 2023
We investigate how liquidity providers (LPs) choose between high- and low-fee trading venues, in the face of a fixed common gas cost. Analyzing Uniswap data, we find that high-fee pools attract 58% of liquidity supply yet execute only 21% of volume. Large LPs dominate low-fee pools, frequently adjusting out-of-range positions in response to informed order flow. In contrast, small LPs converge to high-fee pools, accep…
Alfred Lehar, Christine Parlour, Marius Zoican
arXiv · arXiv q-fin · 2020
Technological advancement has lead to an increase in number and type of trading venues and diversification of goods traded. These changes have re-emphasized the importance of understanding the effects of market competition: does proliferation of trading venues and increased competition lead to dominance of a single market or coexistence of multiple markets? In this paper, we address these questions in a stylized mode…
Robin Nicole, Aleksandra Alorić, Peter Sollich
arXiv · arXiv q-fin · 2025
Everlasting options, a relatively new class of perpetual financial derivatives, have emerged to tackle the challenges of rolling contracts and liquidity fragmentation in decentralized finance markets. This paper offers an in-depth analysis of markets for everlasting options, modeled using a dynamic proactive market maker. We examine the behavior of funding fees and transaction costs across varying liquidity condition…
Hardhik Mohanty, Giovanni Zaarour, Bhaskar Krishnamachari
arXiv · arXiv q-fin · 2025
Autonomous Market Makers (AMMs) rely on arbitrage to facilitate passive price updates. Liquidity fragmentation poses a complex challenge across different blockchain networks. This paper proposes FluxLayer, a solution to mitigate fragmented liquidity and capture the maximum extractable value (MEV) in a cross-chain environment. FluxLayer is a three-layer framework that integrates a settlement layer, an intent layer, an…
Xin Lao, Shiping Chen, Qin Wang
arXiv · arXiv q-fin · 2017
Oft-cited causes of mini-flash crashes include human errors, endogenous feedback loops, the nature of modern liquidity provision, fundamental value shocks, and market fragmentation. We develop a mathematical model which captures aspects of the first three explanations. Empirical features of recent mini-flash crashes are present in our framework. For example, there are periods when no such events will occur. If they d…
Erhan Bayraktar, Alexander Munk
arXiv · arXiv q-fin · 2011
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow and on the fact that prices are (to a first approximation) diffusive. This naturally accounts for two striking stylized facts: first, large metaorders have to be fragmented in ord…
Bence Toth, Yves Lemperiere, Cyril Deremble, Joachim de Lataillade, Julien Kockelkoren
arXiv · arXiv · 2026
We consider two canonical market-microstructure regularities: the long-memory of trade signs and the square-root law of meta-order impact. The point is not to propose new empirical laws, but to separate the clocks on which existing laws are defined. The sign-memory law is an event-time statement about the ordering and fragmentation of hidden orders. The square-root impact law is an operational-time statement about fr…
Christopher Angstmann, Tim Gebbie