Programming my own continuous auction order-driven market

[vampiretooth]

Hey folks, I'm a college student seeking to understand stock exchange and market making mechanisms at a more fundamental level. To that end, I’m trying to using Python to make a market microcosm at my university that uses the continuous double auction mechanism and that, at least preliminarily, trades dummy securities with no fundamental value (no present-value dividend stuff, etc). I haven't found much literature or discussion on this and was wondering if there are any resources/advice you all could share to help me kick start my process.

As an addition: from what I understand, Vernon Smith in his experimental econ research has used a similar mechanism in his studies, but I wasn’t able to find any resources on how exactly he created it.

 

[Kernel007]

You want to create your own exchange?

 

[ZBZB]

Do it on a field programmable gate array, fpga, will look good on he cv. High frequency trading is done on fpga collected at the exchange.

 

[IAS_LLC]

Now there is an idea....a python compiler for an FPGA target...that would be game changing.

 

[2rosy]

first thing to do is write the double auction algorithm. put that in an "exchange" that accepts orders, solves the auction price and sends out fills. maybe put it under a rest server. From limited looking price = (buys+sells)/2 for buy prices>sell prices

 

[vampiretooth]

You want to create your own exchange?

pretty much, yes. The volume would obviously be much lower due to it being within a college microcosm, so I'm currently more interested in how to make one that can robustly handle a few transactions rather than focusing on how it can handle high frequency trading

 

[vampiretooth]

Do it on a field programmable gate array, fpga, will look good on he cv. High frequency trading is done on fpga collected at the exchange.

Appreciate the advice. A contingent question: say I've used python to create the auction mechanism and a website where users can buy and sell shares. Where does the FPGA come into this? Sorry if the question is stupid, I'm not new to programming but new to the larger environment that this kind of project demands.

 

[Kernel007]

Not sure, but seems main logic would be the maintenance of the “book” for each instrument. That is the bid and the offers. Now we then match bid offers that match

 

[IAS_LLC]

Appreciate the advice. A contingent question: say I've used python to create the auction mechanism and a website where users can buy and sell shares. Where does the FPGA come into this? Sorry if the question is stupid, I'm not new to programming but new to the larger environment that this kind of project demands.

The FPGA is for fast, high volume data handling. If you're serious about this, dont concern yourself with FPGAs just yet....write your algorithms, and then pay someone who writes vhdl (the FPGA language) to convert your "hot path" algorithms to FPGA, where applicable.