[2N5-GS-10] AI application

[2N5-GS-10-01] Comparing a price limit and a circuit breaker in stock exchanges by an agent-based model

〇Takanobu Mizuta¹, Isao Yagi² (1. SPARX Asset Management Co., Ltd., 2. Faculty of Informatics, Kogakuin University)

Keywords:finance, artificial market, multi-agent simulation, price limit, circuit breaker

Preventing rapidly and largely falling market prices is significantly important to prevent financial crisis, so some stock exchanges implement them. There are many discussions for the question which regulation prevents rapidly and largely varying more effectively. In this study, I investigated which is more effective to prevent falling market prices using the artificial market model which is an agent-based model for a financial market. In the result, the both basically prevent to fall almost same effectively when those of parameters, limit price range and limit time range, are same. However, the price limit is poorer effective than the circuit breaker when limit time range is smaller than cancel time range. In the case with the price limit many sell orders are accumulated around the lower limit price. Here, the lower limit price is changed before the accumulated sell orders are cancelled, and it leads to make more accumulated sell orders on various prices. Such the accumulated sell orders on various prices play a role like as wall against buy orders, and the wall prevent to rise prices by some buy orders. It should be taken very carefully that the result of this study showed in the limited situation. The result, the circuit breaker is better than the price limit, is adapted only in the case that the reason why prices are falling is erroneous orders and that individual stocks are regulated.