A number of financial market participants are funding research into the use of supercomputing and data intensive science directed at improving the stability, regulation and enforcement of U.S. markets. The $100,000 funding is being directed to the Centre for Innovative Financial Technology at Lawrence Berkeley National Laboratory. The funders are Tudor Investment Corp., AJO Partners, Infinium Capital Management and the Nasdaq OMX Foundation.
The CIFT was established to help build a bridge between the computational sciences and financial markets communities, and was motivated in part by the Flash Crash of 2010. Such instances present data-intensive computing challenges that are similer to those addressed by Berkeley Lab, which has experience of using supercomputers to study large-scale problems and to model processes and complex systems.
“There are many ways existing supercomputer computing systems are advantageous to regulation and enforcement. They remove all of the data size and computation speed limits for these functions. The need for improved analysis, simulation and testing of market system integrity has been demonstrated repeatedly by a series of market mishaps,” says CIFT Director David Leinweber.
Marcos Lopez de Prado, head of global quantitative research at the Tudor, comments: “Those responsible for market oversight could benefit from real-time ability to effectively monitor a complex system. Recent events, including the Flash Crash and other market disruptions, have highlighted the need to solve potential inadequacies in market structure and execution. Our research, in collaboration with CIFT, has shown that relatively simple analytics, like the HFPIN metric of order flow toxicity, can provide up to an hour’s advance warning of certain market anomalies.”