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I. INTRODUCTION

*

The computer program of the Trade Completion Simulation model, provided in this supplement, was developed for the securities industry to enable researchers to evaluate alternative trade completion systems.

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The simulation program is coded in SIMSCRIPT II, a programming language with extensive built-in Monte Carlo facilities, because of the ease of using dynamic data structures (entities) and their organization into sets, the comprehensive debugging package, and the fast execution speeds. Another feature of the language that proved helpful was the capability it provided of using different random number streams so that a particular activity, e.g., trading volume generation, could be tested under slightly different random number patterns.

The pro

The program (and the compiler) can be executed on any IBM 360 (models 40 and larger) that has at least a 256K byte memory. gram has been compiled and executed to date under the MVT supervisor option of the IBM 360 Operating System. There are no known coding dependencies that might prevent its execution under the PCP or MFT options of the same operating system.

In the computer printout reproduced in this supplement, the program code letters are STC. The model, data inputs, and program descriptions are contained in R. L. Petruschell, S. J. Benton, D. J. Dreyfuss, L. E. Knollmeyer, J. Y. Lu, and R. E. Stanton, Reducing Costs of Stock Transactions: A Study of Alternative Trade Completion Systems, Vol. III, The Trade Completion Simulation Model, The Rand Corporation, R-552-ST, December 1970. The subprogram coding in this supplement is listed in the order of the descriptions appearing in Sec. III in Vol. III.

*p. J. Kiviat, R. Villanueva, H. M. Markowitz, The SIMSCRIPT II

Programming Language, Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1968. A nonproprietary compiler is available through the IBM SHARE customer group.

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4. NUMBER OF DAYS THE SIMULATION RUNS (INTEGER, NEW CARD)

5. NUMBER OF FIRMS (INTEGER)

6. WHAT IS THE FIRST DAY DATA FOR SUMMARY STATISTICS SHOULD BE GATHERED INTEGER)= 7. INTERVAL BETWEEN SNAPSHOT PRINTOUT (ANSWER IN DAYS) (INTEGER) =

8. WOULD YOU LIKE AN INTERVAL WITH CONTINUOUS DAILY PRINTOUT (YES OR NO)(ALPHA)= TO START DAY (0 IF ANSWER WAS NO) (INTEGER) =

TO END DAY (O IF ANSWER WAS NO) (INTEGER)

9. WHICH DISPLAYS WOULD YOU LIKE TO SEE?

(ALPHA)

=

(ALPHA)

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=

FAIL HISTOGRAMS (ANSWER YES OR NO)
DELIVERY ORDERS REMAINING AT END OF DAY (ANSWER YES OR NO) (ALPHA)
STOCK LOANS OUTSTANDING AT END OF DAY (ANSWER YES OR NO) (ALPHA)
10. WOULD YOU LIKE IDENTICAL TRADING PATTERNS FOR ALL VOLUMES AS
A MULTIPLE OF THE BASE VOLUME (ANSWER YES OR NO)
BASE VOLUME (0 IF ANSWER WAS NO) (INTEGER) =
11. WHICH STREAM OF RANDOM NUMBERS WOULD YOU LIKE TO
GENERATE THE TRADING PATTERN (1 THROUGH 10) (INTEGER)
12. YEARLY INTEREST RATE (REAL) =

STOCK CHARACTERISTICS:

13. IDENTIFICATION NAME OF STOCK (ALPHA, NEW CARD)
14. BASE AVERAGE DAILY TRADING VOLUME

15. BASE AVERAGE PRICE OF STOCK (REAL) INDUSTRY-WIDE OPERATING CHARACTERISTICS:

=

=

=

(INTEGER, NEW CARD) =

=

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20. PERCENTAGE OF FREE INVENTORY AVAILABLE FOR STOCK LOANS (REAL)
21. PERCENTAGE OF TRADES UNCOMPARED

(REAL) =

22. AVERAGE INTERREGIONAL DELIVERY TIME (DAYS, O IF ALL FIRMS ARE

LOCATED IN SAME AREA) (INTEGER) =
23. DURATION FIRMS HOLD CERTIFICATES PRIOR TO TRANSFER (DAYS, IF NO

OVERNIGHT BOX IS DESIRED ANSWER 1) (INTEGER)=

24. PERCENTAGE CASH CUSTOMERS LEAVING CERTIFICATES WITH BROKER
25. PERCENTAGE MARGIN SALES SOLD SHORT (REAL) =

26. PERCENTAGE MARGIN BUYS COVERING SHORTS (REAL) =

(REAL)

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(REAL)

27. PERCENTAGE DELIVERIES NOT MADE DUE TO DENOMINATION PROBLEM

28. PERCENTAGE OF BROKER TO BANK DELIVERIES THAT ARE DK'D
29. STOCK LOANS WILL BE MADE TO COVER FAVORED FAILS

CHOOSE ONE OF THE FOLLOWING

NO FAILS

INSTITUTIONAL FAILS ONLY

BROKER TO BROKER FAILS ONLY

CASH FAILS ONLY

BOTH INSTITUTIONAL AND BROKER TO BROKER FAILS
BOTH BROKER TO BROKER AND CASH FAILS

BOTH CASH AND INSTITUTIONAL FAILS

ALL FAILS

YOUR CHOICE (WRITE CHOICE EXACTLY AS ABOVE) (ALPHA, NEW CARD) 30. PARTIAL DELIVERIES WILL BE MADE FOR

CHOOSE ONE OF THE FOLLOWING

NO ORDERS

INSTITUTIONAL ORDERS ONLY

-4

BROKER BALANCE ORDERS ONLY

STOCK LOAN REPAYMENTS ONLY

BOTH INSTITUTIONAL AND BROKER BALANCE ORDERS

BOTH BROKER BALANCE ORDERS AND STOCK LOAN REPAYMENTS

BOTH STOCK LOAN REPAYMENTS AND INSTITUTIONAL ORDERS

ALL BROKER AND INSTITUTIONAL ORDERS AND STOCK LOAN REPAYMENTS YOUR CHOICE (WRITE EXACTLY AS ABOVE) (ALPHA, NEW CARD)=

31. CLEARING PROCEDURE TO BE USED

CHOOSE ONE OF THE FOLLOWING

TRADE BY TRADE

DAILY NET

SORT ON FIRM'S NET POSITION - DAILY NET
CONTINUOUS NET

YOUR CHOICE (WRITE CHOICE EXACTLY AS AROVE) (ALPHA, NEW CARD)=

32. DESIRED PRIORITY FOR DELIVERY ORDERS (PLEASE RANK) (4 INTEGERS, NEW CARD) PLACE PRIORITY HERE

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TYPE

INSTITUTIONAL

CASH CUSTOMER

STOCK LOAN REPAYMENT

DISTRIBUTIONS:

RULES:

BROKER TO BROKER (BALANCE ORDER)

A. FOR EACH DISTRIBUTION USER HAS THE CHOICE OF A UNIFORM,

TRIANGULAR,
NORMAL,
LOGNORMAL,
EXPONENTIAL
GAMMA

8. FOR EACH TYPE OF DISTRIBUTION EXCEPT THE TRIANGULAR THE MEAN AND
THE STANDARD DEVIATION ARE REQUESTED AS PARAMETER1 AND PARAMETERZ.
C. FOR THE TRIANGULAR DISTRIBUTION THE MODE IS REQUESTED FOR
PARAMETER1 AND THE MAXIMUM IS REQUESTED FOR PARAMETER2.
33. WOULD YOU LIKE TO DISTRIBUTE TRADES BY

MARKET SHARE USING A NORMAL DISTRIBUTION
INVENTORY POSITION OF THE FIRM

YOUR CHOICE (WRITE CHOICE ENTIRELY AS ABOVE) (ALPHA)

PARAMETER1 IS GIVEN AS FIRM PROPORTION OF MARKET SHARE
PARAMETER2 (STD AS A PROPORTION OF MARKET SHARE) (REAL) NEW CARD)
34. STOCK LOAN PAYBACK TIME DISTRIBUTION (ALPHA, NEW CARD) ・
PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD)=
PARAMETER2 (STD OR MAX) (REAL)

=

=

35. UNCOMPARE RESOLUTION TIME DISTRIBUTION (ALPHA, NEW CARD) =
PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD)
PARAMETER2 (STD OR MAX) (REAL)

36. TRANSFER TIME DISTRIBUTION (ALPHA, NEW CARD)

PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD)
PARAMETER2 (STD OR MAX) (REAL) =

=

37. CASH CUSTOMER CERTIFICATE ARRIVAL TIME DISTRIBUTION (ALPHA, NEW CARD)
PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD) =
PARAMETER2 (STD OR MAX) (REAL)

=

-5

38.

INSTITUTIONAL CERTIFICATE ARRIVAL TIME DISTRIBUTION (ALPHA, NEW CARD)
PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD) =
PARAMETER2 (STD OR MAX) (REAL) =

39. BANK TO BROKER DK RESOLUTION TIME DISTRIBUTION (ALPHA, NEW CARD)

PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD) =
PARAMETER2 (STD OR MAX) (REAL) =

=

=

40. BREAKDOWN OF CUSTOMER ORDERS INTO LOTSIZES DISTRIBUTION (ALPHA, NEW CARD) = PARAMETER 1 (MEAN OR MODE) (REAL, NEW CARD) = PARAMETER2 (STD OR MAX) (REAL) =

41. BREAKDOWN OF INSTITUTIONAL ORDERS INTO LOTSIZES DISTRIBUTION (ALPHA, N C) = PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD) = PARAMETER2 (STD OR MAX) (REAL)

42. 0.T.C. DELIVERY TIME DISTRIBUTION (ALPHA, NEW CARD)

SSUE INPUT:

PARAMETER1 (MEAN OR MODE) (REAL, NEW CARD) =
PARAMETER2 (STD OR MAX) (REAL)

=

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43. IDENTIFICATION NAME OF STOCK (SAME AS QUESTION 13) (ALPHA, NEW CARD)

44. OTC CODE (ANSWER 1 IF ISSUE IS OTC, O IF ISSUE IS NOT OTC) (INTEGER, NEW CARD) 45. INDUSTRY FLOAT (INTEGER)=

46. PROBABILITY OF RECOVERY FROM ZERO VOLUME (REAL)=

47. AVERAGE RECOVERY VOLUME FROM ZERO (INTEGER)

48. NUMBER OF DIFFERENT VALUES DESIRED FOR PERCENTAGE CHANGE IN VOLUME (INTEGER)→ 49. PERCENTAGE CHANGE IN VOLUME (REAL)

=

ENTER NUMBER OF VALUES CORRESPONDING TO ANSWER TO QUESTION 48.

50. CUMULATIVE PROBABILITY FOR SAMPLING PROCEDURE (REAL) =

ENTER NUMBER OF VALUES CORRESPONDING TO ANSWER TO QUESTION 48.

51. PROPORTION OF MARKET SHARE PER FIRM (INTEGER) =

IRM INPUT:

ENTER NUMBER OF VALUES CORRESPONDING TO ANSWER TO QUESTION 5.

52. ONE CARD PER FIRM (NUMBER OF FIRMS DETERMINED BY QUESTION 5).
EACH CARD SHOULD CONTAIN INPUT VALUES FOR:

A. PROPORTION OF BUSINESS ATTRIBUTABLE TO CASH CUSTOMERS (INTEGER)
8. PROPORTION OF BUSINESS ATTRIBUTABLE TO MARGIN CUSTOMERS (INTEGER)

C. PROPORTION OF BUSINESS ATTRIBUTABLE TO INSTITUTIONAL CUSTOMERS (INTEGER)
D. PROPORTION OF BUSINESS ATTRIBUTABLE TO PROPRIETARY ACCOUNT (INTEGER)
E. LOCATION CODE (0 IF FIRM IS N.Y. BASED,1 IF FIRM IS NOT IN N.Y. XINTEGER)
F. NON HOUSE NAME INVENTORY (INTEGER)

G. HOUSE NAME INVENTORY (INTEGER)
H. SEGREGATION REQUIREMENT (INTEGER)

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CODE (4/4)) IN WORD 1,

AN AMOUNT IN WORD 2,

TEMPORARY ENTITIES

EVERY ORDER HAS A (B(1/2),CB(2/2)) IN WORD 1,

AND BELONGS TO A TEMPORARY.FILE

EVERY DELIVERY.ORDER HAS A (BROKER (1/4), CONTRA.BROKER(2/4), TYPE (3/4),

P0020

P0055

P0060

P0065

P0070

P0075

P0080

P0085

DEFINE PERMANENT ENTITIES

A (DEL.DENOM. PROBLEM(1/2),REC.DENOM.PROBLEM(2/2)) IN WORD 21,
A (DEL.DK (1/2), REC.DK (2,2)) IN WORD 22,

A DATE IN WORD 3,

AN INITIAL.DATE IN WORD 49

AND BELONGS TO A FILE.OF.DELIVERY.ORDERS

EVERY STOCK.LOAN HAS A (BROKER (1/4),CONTRA.BROKER(2/4),TYPE(3/4))

IN WORD 1,

AN AMOUNT.LOANED IN WORD 2,

A DUE.DATE IN WORD 3,

AND BELONGS TO A GROUP.OF.STOCK.LOANS

DEFINE INSTITUTIONAL.SALES TO MEAN SALES.INSTITUTIONAL
DEFINE INSTITUTIONAL. BUYS TO MEAN BUYS.INSTITUTIONAL
DEFINE MARGIN.SALES TO MEAN SALES.MARGIN
DEFINE MARGIN. BUYS TO MEAN BUYS.MARGIN

PERMANENT ENTITIES

EVERY HOUSE OWNS A FILE.OF.DELIVERY.ORDERS,

HAS A (NET.BUYS (1/2), NET.SALES(2/2)) IN WORD 1,

A (CASH.BUYS (1/2), CASH.SALES(2/2)) IN WORD 2,

A (INSTITUTIONAL.BUYS (1/2), INSTITUTIONAL.SALES(2/2)) IN WORD 3,

A (MARGIN.BUYS (1/2),MARGIN.SALES(2/2)) IN WORD 4,

A (SALES. PROPRIETARY (1/2), BUYS.PROPRIETARY(2/2)) IN WORD 5,

A WRONG.NAME.INVENTORY IN WORD 6,

A RIGHT.NAME.INVENTORY IN WORD 7,

A SEGREGATION REQUIREMENT IN WORD 8,

A DUMMY.SEGREGATION IN WORD 9,

AN IINITIAL.SEGREGATION IN WORD 10,

A (LOCATION(1/2), PROP.MARKET.VOLUME (2/2)) IN WORD 11,

A (PRB.CASH(1/4),PRB.MARGIN(2/4), PRB.INST(3/4), PRB.PROP(4/4))
IN WORD 12,

A (DEL.TRANSFER (1/2),DEL.OLD.BAL.ORDERS(2/2)) IN WORD 13,

A (DEL.NEW.BAL.ORDERS(1/2),DEL.CUR.STOCK.LOANS (2/2)) IN WORD 14,

A (DEL.PAST.STOCK.LOANS (1/2), DEL.FAILED. STOCK.LOANS (2/2)) IN WORD 15, PO250

A (DEL.0.CASH.CUST(1/2),DEL.N.CASH.CUST(2/2)) IN WORD 16,

A (DEL.0.INST (1/2),DEL.N.INST(2/2)) IN WORD 17,

A (REC.TRANSFER (1/2),REC.OLD.BAL ORDERS(2/2)) IN WORD 18,

A (REC.NEW.BAL.ORDERS (1/2),REC.CUR.STOCK.LOANS(2/2)) IN WORD 19,

P0255

P0260

P0265

P0270

A (REC.PAST.STOCK.LOANS (1/2),REC.FAILED.STOCK.LOANS (2/2)) IN WORD 20, P0275

P0090

P0095

P0100

P0105

P0110

P0115

P0120

P0125

.. REDEFINE VARIABLE NAMES TO GET AROUND FIRST 8 UNIQUE * P0135

P0130

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P0145

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P0155

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P0165

P0170

P0175

P0180

P0185

P0190

P0195

P0200

P0205

P0210

P0215

P0220

P0225

P0230

P0235

P0240

P0245

A REC.CUST IN WORD 23

DEFINE DUMMY.SEGREGATION AS A REAL VARIABLE

SFT STRUCTURES ARE DEFINED **

DEFINE TEMPORARY FILE AS A FIFO SET

WITHOUT FB AND FA ROUTINES

DEFINE GROUP.OF.STOCK.LOANS AS A SET RANKED BY LOW DUE.DATE
WITHOUT L ATTRIBUTES, WITHOUT FL,FB,FA,RL ROUTINES

P0280

P0285

P0290

P0300

P0010

P0025

P0035

P0040

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