**4. Experiments and Results**

We use our simulated asset market to conduct two separate experiments to evaluate the impact of AT on (1) market liquidity; and (2) in the presence of statistical arbitrage/pairs trading, the relations between the price and the fundamental value of the stock. In each experiment, our strategy is to gradually increase the market presence of AT starting from 0% of the market where there are no AT to 100%, where all trade is conducted exclusively by AT. We evaluate the market quality of interest at each level of market presence of AT, thus studying how the market quality might change with the advent and progression of AT.

For each experiment, the results reported represent an average of a number of runs of the experiment, where each run comprises a fixed numbers of trading days. The market outcome of interest is recorded a number of times during each run, this outcome is then averaged for each run and presented in the results. The number of traders in each experiment remains constant while the mix of the types of traders is varied to evaluate changes to the market outcome.

The number of each type of trade, in our simulations, is proportional to the trading latency and the proportion of traders in each run. These di ffer in each set as algorithmic trading is increased as a proportion of the market (Table 1). The number of fundamental human trades is always smaller than algorithmic trades of all varieties due to two factors. First, this is because of longer latency of human fundamental traders. Second, as the number of fundamental human traders is progressively reduced in each experiment, the numbers of their trades fall. Third, the number of trades vary, due to the randomness of each run in terms of the initial price and the evolution of the price through subsequent trade.
