ROMA (ITALPRESS) – “The work examines the adoption of an emerging class of algorithmic trading strategies, known as Auto-Hedging (AH), by market makers active in the secondary market of Italian state securities. AH’s strategies allow market makers to quickly rebalance the exposures resulting from the performance of their quotations, mitigating the risks associated with the assumption of portfolio positions and adverse selection. Using single-market transaction data from MTS, the work documents a strong increase in the use of such strategies from 2020, with an extended spread between operators and tools.” This is what emerges from “High-speed coverage strategies” in the State securities markets”, the 90th issue of the “Mercati, Infrastructure, Payment Systems” series published by the Bank of Italy.
Empirical analysis shows that “the differences in the use of AH are mainly attributable to specific and persistent characteristics of individual intermediaries, while market liquidity conditions exert a lower influence, although statistically significant. The results indicate that the use of AH can also be influenced by factors outside the trading environment. Overall, the study highlights the growing role of algorithmic trading in risk management associated with market-making and the challenges that traders face in increasingly fast and competitive electronic markets.”.
– Photo Ipa Agency –
(ITALPRESS).
