Research for more stability in the futures market

There will be an investigation into new methods to protect commodity and financial markets against fraud. Wageningen University & Research (WUR), the European Organization for Nuclear Research (CERN) and the Commodity Risk Management Expertise Center (CORMEC) are joining forces for this.

The three parties have signed an agreement to conduct joint investigations. One of the starting points is more stability, and therefore better prices, on the agricultural futures markets. The parties want to develop new methods that protect commodity and financial markets against malpractice (fraud). By identifying irregularities, the integrity of these markets should be improved.

The project will be named 'High Energy Physics Tools in Limit Order Book Analysis' (HighLO) and will last 3 years. In total, an amount of €2,9 million will be invested. The first results are expected at the end of this year.

Particle Accelerator Similarities
The initiator of the project is Joost Pennings, professor of marketing at WUR. During a visit to the European research institute CERN in Switzerland, he realized that there are similarities between the billions of collisions in the particle accelerator and the high-speed trading on the commodity futures markets, where multiple orders are placed per nanosecond. Most trades (or particle collisions) do not result in anomalies. If it does, it can lead to new insights.

The research uses market data and knowledge from WUR and CORMEC. CERN, in turn, contributes expertise in the field of data analysis and techniques. The parties jointly strive to identify market manipulation. In addition, the research may lead to the development of tools that can be used to predict financial instability. Market parties would also gain more insight into risk management, which would reduce capital costs.

Jeanette Pennings

Jeannet has her roots in the flower bulb sector and she grew up on an agricultural company in the northern part of North Holland. As a generalist she reports for Boerenbusiness across all sectors. She is also exploring the possibilities of sponsored advertising.

j.pennings@boerenbusiness. Nl

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