BSE: A Minimal Simulation of a Limit-Order-Book Stock Exchange (1809.06027v1)

Abstract: This paper describes the design, implementation, and successful use of the Bristol Stock Exchange (BSE), a novel minimal simulation of a centralised financial market, based on a Limit Order Book (LOB) such as is common in major stock exchanges. Construction of BSE was motivated by the fact that most of the world's major financial markets have automated, with trading activity that previously was the responsibility of human traders now being performed by high-speed autonomous automated trading systems. Research aimed at understanding the dynamics of this new style of financial market is hampered by the fact that no operational real-world exchange is ever likely to allow experimental probing of that market while it is open and running live, forcing researchers to work primarily from time-series of past trading data. Similarly, university-level education of the engineers who can create next-generation automated trading systems requires that they have hands-on learning experience in a sufficiently realistic teaching environment. BSE as described here addresses both those needs: it has been successfully used for teaching and research in a leading UK university since 2012, and the BSE program code is freely available as open-source on GitHuB.