A simulation and test of OptiMark's electronic matching algorithm and its simple variations for institutional block trading

Authors:
Christian Gerber;Jeffrey Teich;Hannele Wallenius;Jyrki Wallenius
Affiliations:
IBM Germany, Erzgießereistr. 21, München 80335, Germany;Rotterdam School of Management, Erasmus University, POB 1738, 3000 DR Rotterdam, The Netherlands and Department of Management, New Mexico State University, Las Cruces, NM;Department of Industrial Engineering and Management, Helsinki University of Technology, POB 9500, 02015 HUT Helsinki, Finland;Helsinki School of Economics, POB 1210, 00101 Helsinki, Finland
Venue:
Decision Support Systems
Year:
2004

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Abstract

OptiMark, an automated crossing system that matches institutional buyers and sellers of company stock, is simulated via a multi-agent system. The results are contrasted with two algorithm variations, which are based on a cruder rating system. Performance measures include the volume of stocks traded, the extent of price discrimination, trader utility, efficiency of matches, and processing time. Our results indicate that the cruder rating schemes perform as well as the original version for moderately sized markets. Yet, a test with human subjects implies that our crudest preference elicitation scheme appears simpler to use than the original scheme. We hope that this finding will help resolve some recent problems that OptiMark's system has faced concerning the difficulty of use.