Carsten Holtmann

Germany: computer-aided market engineering

he Computer-Aided Market Engineering (CAME) tool suite meet2trade showcases a service engineering approach to the development of electronic markets as a service offering. For e-markets, the market operator—as service provider— decides the following prerequisites that characterize the complex service: the products that will be traded; the market rules to match demand and supply; the IT infrastructure of the trading platform; the business structure defining the value proposition; and the business model to derive revenue from the service offering. The CAME tool suite provides a conceptual framework for designing e-markets, a process model to guide the design, and methods and tools supporting these design steps. These tasks are inherently interdisciplinary. The strategic task of defining the segment, in which the e-market is intended to operate, is primarily a management and marketing endeavor. The design of the market mechanisms that describe the flow of the negotiation process, pertains to economics. Implementing the market mechanisms as a running service system is mainly a software engineering task. The CAME approach extends state-of-the-art methods, as it tackles all problems associated with the design of e-markets holistically. For example, Knowledge-based Auction Design Support (KADS) enables the market operator to decide on the principal auction format. Auction Runtime Environment (ARTE) and Adaptive Client (AC) support the transformation of the concept into an instantiation of a running auction format, supporting embodiment and detail design. Lastly, Agent-based Simulation Environment (AMASE) and Experimental System (MES) provide extensive testing functionalities. Prototypes can be generated and tested on-the-fly, improving the design process considerably. This research work focuses on how to design and operate market services, how to gain knowledge for this task, and how to provide this knowledge to those who need to set up auctions, exchanges, or e-procurement platforms. CAME epitomizes an SSME approach and meet2trade workbench showcases an integrated outcome of service sciences, management, and engineering.

Towards a Generic e-Market Design

The design of the microstructure of electronic markets is crucial for their success. Less effort has been made in this area, especially for commodity markets. This paper illustrates five key problems of e-market design and introduces the concept of cascading dynamic market models as a promising solution to cope with most of them. Taking the multi-dimensional character of commodities into consideration, further research in this area is encouraged. Furthermore, the project ‘Electronic-Financial-Brokerage as knowledge intensive services — a generic approach’ dealing with those problems is briefly presented

The Design of Innovative Securities Markets: The Case of Asymmetric Information*

This paper is the first experimental study on Dynamic Market Models (DMM). A DMM is a multiplatform market structure that enables an investor to specify — individually and for each transaction separately — the desired market model within one marketplace. Following the requirements of investors, the prototype of a multiplatform market model is designed and implemented: The VTR (Virtual Trading Room) system allows traders to simultaneously trade stocks via an open orderbook and a bilateral negotiation. The prototype is then used to perform experiments in order to investigate two issues: First, the general acceptance of DMM is questioned. Second, the case of asymmetrically informed participants using innovative market mechanisms is studied. Using the cover story of an experiment previously performed by Lamoureux and Schnitzlein (LS, [LaSc97]), the obtained results from the multiplatform market are compared to a pure “orderbook-market” and to the LS data. The results show that the suggested innovative price discovery mechanisms play a minor role — presumably due to high overall market liquidity. However, liquidity traders sooner accomplish their goals when DMM are introduced. On the other hand, the frequency of informed/uninformed trades increases when the multiplatform structure is employed.

Competition of Retail Trading Venues − Online-brokerage and Security Markets in Germany

German regional stock exchanges rival in the horizontal inter-exchange competition for order flow of investors. Particularly, they are trying to be an attractive option for private retail investors and differentiate against the competition. Differentiation often comes in terms of ‘price quality’ and the attempt to reduce implicit transaction costs for the investors. Therefore, many exchanges have begun to extend their established trading rules. With different labels and – in detail slightly differing – service attributes, e. g. best-execution guarantees have been introduced to most markets. These offerings have in common, that investor gets a guarantee that the price for a transaction will be at least as good as it would be at a predefined – often more liquid – reference market. For retail investors, it is not only the implicit transaction costs but also the explicit ones that are relevant for his orderrouting decision. These are the sum of provisions and fees that are charged by the service providers that participate in routing and matching an order as well as clearing a deal.

Using Blueprints for Engineering Electronic Market Services

The institution of ¿electronic markets as services¿ needs careful design. In this context, Market Engineering provides a structured design process that guides the market designer in this demanding task. In analogy to the engineering design process, the design stage of the Market Engineering process is decomposed into four major phases being the conceptual design, embodiment design, detail design and implementation. While the conceptual design phase is concerned with the formulization of the problem and the search for abstract solutions, the embodiment design refines the abstract concepts to blueprints that serve as a representation format for further design steps. So far, there was no applicable service blueprinting approach for market engineering. The paper illustrates that protocol diagrams from Agent UML (an UML extension) can serve as the basis for powerful modeling technique for blueprints of electronic market services.

Market Integration and Metamediation: Perspectives for Neutral B2B E-Commerce Hubs

B2B markets have been predicted to revolutionize traditional forms of interaction and to be a milestone within the evolution of the network economy. But most of these electronic markets are floundering. Due to the wide fragmentation most of them have not yet surpassed the critical mass. Failing to attract an adequate number of participants these electronic markets never unfold their endemic potentials. A consolidation process can be observed in the way that markets either exiting the “market for markets ” or even taken over by competitors.

Wertpapierbörsen im Internet — Informationsangebot aus Sicht des Privatanlegers

This paper gives an overview of the information supplied to private investors by the most important international as well as German regional stock exchanges, Results of the analysis show that the various stock exchanges differ significantly concerning information supply and processing. Despite the fact that stock exchanges have improved the information supply for private investors, many institutions continue to focus mainly on the specific needs of institutional investors.

SOA in the Financial Industry – Technology Impact in Companies’ Practice

Service-oriented Architecture (SOA) basically is an innovative concept for designing software infrastructures. To better understand the idea and concepts of SOA it seams promising to take a look at how the Information and Communication Technology (ICT) has developed since the beginning of 70ths (see Table 1.1). Four major developments concerning architectural paradigms can be observed.

Agent-based Bidding in Electronic Markets

The overall change in computing from manipulation to delegation was already predicted in the mid-90s but hitherto remains a bold vision. Although software agents have the potential of fully automating processes, real world agent-based applications are very limited in number. Even in the case of electronic markets software agents are rarely employed, albeit they can act as autonomous representatives of human negotiators.