Using FTS for Research

In 2002 the Nobel Prize was awarded to:

 Daniel Kahneman, "for having integrated insights from psychological research into economic science, especially concerning human judgment and decision-making under uncertainty" and

Vernon L. Smith, "for having established laboratory experiments as a tool in empirical economic analysis, especially in the study of alternative market mechanisms"

The Financial Trading System (FTS) creates a trading room laboratory that allows both insights from psychological research and laboratory experiments to be conducted under controlled conditions.  The FTS markets have been designed and used by researchers with extensive experimental economics experience.  It is designed to put the researcher in control over the problem of designing the environment used in the research.  In addition, a wide range of market institutions under different rules and informational conditions can be tested.   It is also easy to pre-specify sequences of random realizations and other conditions to ensure that formal experimental controls are in place.

Below we highlight some of the useful features that can be exploited for experimental purposes.  Further details are available in the For Instructors section (see link at upper left side of the page).

Flexibility Provided to Researcher by FTS Combined with Excel

The FTS market microstructure and economic environments are completely pre-specified in an Excel spreadsheet.  This provides maximum flexibility to the researcher for creating both simple and complex environments using standard Excel functions and or macros.  In addition payoffs can be dynamic, and made contingent upon realizations in the sessions if needed.  Alternatively, they can be pre-specified and "frozen" simply by using Excel's copy "Paste Special" ability to paste values into cells as opposed to formula and values.

Flexibility Provided to Subjects by FTS Combined with Excel

The FTS markets extend this flexibility to the subject's side by supporting the creation of  a real time link of the market data to a personal Excel spreadsheet, at the "click of a mouse."

This permits powerful experimental support systems to be built and used in the experimental session.

Flexibility Provided for Running the FTS Markets

The FTS markets run on any PC that is part of an intranet or the Internet.  This means that any PC can be the central market and any PC can be a trading station.  With this flexibility you can use any computer cluster or classroom to run an experimental session.  You can even use the web itself!

A powerful login/password system ensures that controls are in place to restrict access.  By using the login/password system you can pre-specify each trader type in terms of their trading rights, endowments, and information and more.  Again, this is designed to keep control in the hands of the experimenter.

Flexibility Provided for Controlling the FTS Markets from Remote

An important utility is the "pTrader" feature that lets you control a market session from remote.  This feature provides not only basic operational controls but allows you to interact with the market in various ways ranging from sending public messages, controlling prices, linking the FTS markets to real world prices, controlling spreads and much more.  Again, details are provided online in the "For Instructors section (see link upper left side of the page).

Flexibility Provided for Controlling the FTS Market Institution

You can even change the type of market being conducted "on the fly."  That is, the Advanced FTS Markets lets you conduct not only the continuous double auction markets, but also call markets, pre-markets (with price discovery), post markets (without price discovery) and a range of Treasury style auctions. In addition you can even control margins and other related constraints imposed upon trading.

This makes the system the most powerful available today for financial market research.