By Ellen Woudstra
In February 2018, Albert Menkveld, Professor of Finance, won the prestigious Vici grant from the NWO (Netherlands Organization for Scientific Research). Albert received the € 1,5 million grant for his research proposal entitled “Financial Technology’s (FinTech’s) Disruptive Impact on Financial Markets: Social Costs and Benefits of an Emerging New Architecture”.
Albert Menkveld feels deeply honoured. ‘The fact that I have been awarded the Vici grant is a recognition by peers, not only of the ambitious research agenda I proposed, but also of what I have achieved thus far with the support of my earlier Veni and Vidi grant’, he says.
|The NWO Vici grant is intended for highly experienced researchers who have successfully demonstrated the ability to develop their own innovative line of research and can act as a coach for young researchers. Vici provides researchers with the opportunity to build their own research group, often in anticipation of a tenured position as professor. The Vici grant is one of three types of grant in the Talent Scheme. The other two are the Veni grant (for researchers who have gained their doctorates within the last three years) and the Vidi grant (for experienced postdocs who have received their doctorates within the last 8 years).|
Albert’s research focuses on robotic trading. Robots facilitate trade, but increasingly act as traders themselves. Is this new architecture better than the old one? And what are the risks involved? A summary of the research is given below:
The optimal design of financial markets has long been an important field in economics. What type of market maximizes welfare and is thus most desirable? And, does it arise naturally or might we be stuck in a sub-optimal equilibrium? In finance, the field is referred to as microstructure.
Microstructure research moved center stage in recent decades as exchange floors were replaced by computers matching buy and sell orders. Traders, in turn, coded their trading strategies into computer algorithms and let “robots” execute them on their behalf. This development received lots of public attention, in particular after Michael Lewis published the instant best seller Flash Boys in 2014. Regulators worldwide struggled to take a position as to whether the new microstructure was good for investors and the economy at large. Microstructure papers benefitted from the attention and appeared in the very top journals in finance and economics.
The arrival of electronic markets is only the beginning of how financial technology (FinTech) will re-shape the financial industry, says Mark Carney, current chairman of the FSB, a consortium of central bankers world-wide. The academic community agrees. Leading scholars conclude that Fin-Tech will alter financial institutions and markets in ways that existing knowledge about them is of little use. Moreover, the ensuing digital economy will produce big data in need of being processed meaningfully to both understand and control the new financial system.
|Albert Menkveld is Professor of Finance at Vrije Universiteit Amsterdam and Fellow at the Tinbergen Institute. In 2002, he received a Tinbergen PhD from Erasmus University Rotterdam. He was on visiting positions for multiple years at various US schools (NYU, Wharton, and Stanford). Albert's research agenda is focused on securities trading, liquidity, asset pricing, and financial econometrics. He has published in various journals, for example, the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies. Albert is Associate Editor at the Review of Asset Pricing Studies and a Research Fellow at the Centre for Economic Policy Research (CEPR).