Price formation in an artificial market: limit order book versus matching of supply and demand

The problem of insider trading and other illegal practices in financial markets is an important issue in the field of financial regulatory policies. Market control bodies, such as the US SEC or the Italian CONSOB [1], regularly perform statistical analyses on security prices in order to unveil clues of fraudulent behaviour within the market. Fraudulent behaviour is connected to the more general problem of information asymmetries, which had already been addressed in the field of experimental economics (see, for instance, refs. [2, 3, 4]). Recently, interesting conclusions were drawn thanks to a computer-simulated market at MIT where agents had different pieces of information about the future dividend cash flow of exchanged securities [5]. In particular, in the MIT simulated market, the intelligent agents can replicate various findings of human-based experiments. Here, by means of an agent-based artificial market: the Genoa Artificial Stock Market (GASM) [6, 7], the more specific problem of fraudulent behavi our in a financial market is studied. A simplified model of fraudulent behaviour is implemented.