Jean-Pierre Zigrand, London School of Economics
Dr Zigrand, co-director of the Systemic Risk Centre at the London School of Economics and Political Science (LSE), will work with colleagues in the UK, France, Germany, Finland and the US to improve the security of financial markets which have been radically altered over the past decade due to vastly improved trading speeds.
The "Digging into High Frequency Data" project is funded by the ESRC, the AHRC and 14 other international research bodies as part of the Trans-Atlantic Platform for the Social Sciences and Humanities.
Dr Zigrand's team will create a transatlantic securities market database, allowing researchers to better analyse high frequency data generated by automated trading.
"These automated order book submissions and transactions now represent the majority of trading and although we have no formal proof of this yet, they are suspected of occasionally resulting in excessive price fluctuations," Dr Zigrand said.
He said the recent financial market gyrations highlighted the weakness of financial data analytical models, particularly at the European level.
"Well-functioning financial markets are vital for the growth of economies and the security of entire countries. Shifts in globalisation, changes in geopolitics, competition and fragmentation, evolving regulation and demographic shifts all create challenges for the markets," he added.
However, new technologies are causing the most rapid changes and one of the key aims of the project is to train young economists to analyse high frequency data, a skill that usually belongs to computer scientists with no financial background.
"The digitalisation of society and the large use of high frequency trading and algorithmic trading have completely changed our financial markets, which are a vital core of our economic system.
"The increase in trading speed now allows markets to operate far beyond human capabilities, having a dramatic impact on the stability, liquidity and resilience of financial markets," Dr Zigrand said.
Data will be collected at the nanosecond, if possible, which includes not only prices, volumes and dates of the transactions, but also other variables that academics and regulatory authorities can use, such as information about the state of the limit order book.
His team will be comprised of the following researchers: Dr Patrice Fontaine (EUROFIDAI, France); Prof Terrence Hendershott (UC Berkeley, USA), Prof Loriana Pelizzon (Goethe University, Germany); Dr Peter Sarlin (Hanken School of Economics, Finland); Prof Mila Getmansky Sherman (University of Massachusetts Amherst, USA) and Prof Tomaso Aste (UCL, UK).
The project will start on 1 August 2017 and last for three years.