Haoxiang Zhu

Haoxiang Zhu is Gordon Y Billard Professor of Management and Finance and Associate Professor of Finance at the MIT Sloan School of Management. His research primarily focuses on asset pricing, with a particular emphasis on market structure and market design. He has published research papers in Journal of Finance, Journal of Financial Economics, Journal of Economic Theory, Review of Economic Studies, and Review of Financial Studies, among others. Zhu's scholarly contributions have won several awards, including the 2017 Amundi Smith Breeden Prize (First Prize) from the Journal of Finance, the 2016 AQR Insight Award Prize (First Prize), the 2015 Kepos Capital Award for Best Paper on Investments from the Western Finance Association, and the 2013 Review of Financial Studies Young Researcher Prize. In 2016, he was named one of the 40 under 40 Best Business School Professors by Poets and Quants.

From December 2021 to December 2024, Haoxiang Zhu served as the Director of the Division of Trading and Markets at the Securities and Exchange Commission. He led critical initiatives to modernize the regulation of U.S. securities markets. Key achievements include expanding central clearing for Treasury repurchase and cash transactions, shortening the securities settlement cycle to one day, and comprehensively revising rules that govern the market-wide mechanics of stock trading and execution quality disclosure. During his tenure, the SEC also updated existing regulation for broker-dealers and adopted new rules that increase the transparency and integrity of markets for securities lending, short selling, and security-based swaps. Besides rulemaking, Haoxiang Zhu led the Division of Trading and Markets' efforts in the day-to-day oversight of exchanges, alternative trading systems, broker-dealers, FINRA, clearing agencies, and other market participants.

Prior to his SEC role, Haoxiang Zhu served as a finance Department Editor of Management Science, an Associate Editor of Journal of Finance, an academic expert for the U.S. Commodity Futures Trading Commission (CFTC) and the Bank for International Settlements (BIS), and a member of the Federal Reserve Bank of Chicago's Working Group on Financial Markets. He holds a BA in Mathematics and Computer Science from the University of Oxford and a PhD in Finance from Stanford University Graduate School of Business.

What's New

New or Recently Revised Working Papers (see CV for full list)

• Central Bank Digital Currency Design: Implications for Market Composition and Monetary Policy, with Rodney Garratt and Jiaheng Yu, December 2021

Publications/Forthcoming Articles [Show/Hide All]

1. CCP Auction Design, with Wenqian Huang, Journal of Economic Theory, 2024, 217 [+]
   • When a clearing member defaults, the clearinghouse (CCP) sells the defaulted portfolio to surviving members in an auction, and losses, if any, are partly absorbed by a cash pool prefunded by the surviving members. We propose a tractable CCP auction model and consider design features that affect the auction price and efficiency.
2. From Market Making to Matchmaking: Does Bank Regulation Harm Market Liquidity?, with Gideon Saar, Jian Sun, and Ron Yang, Review of Financial Studies, 2023, 36(2), 678--732 [+]
   • Bank regulation creates strong incentives for bank-affiliated dealers to transition from capital-intensive market-making to capital-light matchmaking. This transition can improve market liquidity.
3. When FinTech Competes for Payment Flows, with Christine Parlour and Uday Rajan, Review of Financial Studies, 2022, 35(11), 4985--5024 [+]
   • Payment is informative about credit quality. FinTech competition in payment services creates complex implications on banks in both payment and lending markets.
4. Premium for Heightened Uncertainty: Explaining Pre-Announcement Market Returns, with Grace Xing Hu, Jun Pan, and Jiang Wang, Journal of Financial Economics, 2022, 145(3), 909--936 [+]
   • The stock market has high returns ahead of FOMC, nonfarm payroll, GDP, and ISM announcements, without visibly higher risk measures. A model of heightened uncertainty and resolution can explain them.
5. Strategic Trading when Central Bank Intervention is Predictable, with Liyan Yang, Review of Asset Pricing Studies, 2021, 11(4), 735--761 [+]
   • When the central bank reacts to a lower market price by supportive intervention, strategic investors have the incentive to produce a low price to get the intervention.
6. Swap Trading after Dodd-Frank: Evidence from Index CDS, with Lynn Riggs, Esen Onur, and David Reiffen, Journal of Financial Economics, 2020, 137(3), 857--886 [+]
   • Granular message-level data reveal customers' choice of trading mechanisms and dealers' liquidity provision in swap execution facilities.
7. Back-Running: Seeking and Hiding Fundamental Information in Order Flows, with Liyan Yang, Review of Financial Studies, 2020, 33(4), 1484--1533 [+]
   • A fundamental informed investor and an order-flow informed trader ("back-runner") play a hide-and-seek game.
   • MarketWatch Blog
8. Mortgage Dollar Roll, with Zhaogang Song, Review of Financial Studies, 2019, 32(8), 2955--2996 [+]
   • Mortgage dollar roll is the most important trading strategy to finance agency MBS. Adverse selection and leverage constraint are important drivers in this market.
9. Quantitative Easing Auctions of Treasury Bonds, with Zhaogang Song, Journal of Financial Economics, 2018, 128(1), 103--124 [+]
   • When buying Treasury bonds in its QE operation, the Fed prefers to buy bonds that are cheaper than model, but pays higher price markup on them.
10. Non-Fundamental Speculation Revisited, with Liyan Yang, Journal of Finance (Replications and Corrigenda), 2017, 72, 2759--2772 [+]
11. Are CDS Auctions Biased and Inefficient?, with Songzi Du, Journal of Finance, 2017, 72, 2589--2628 [+]
    • The current design of CDS auctions leads to biased prices and misallocation of bonds. A double auction design does better.
    • Supplementary Appendix
12. Benchmarks in Search Markets, with Darrell Duffie and Piotr Dworczak, Journal of Finance, 2017, 72, 1983--2044 [+]
    • Amundi Smith Breeden Prize (First Prize), Journal of Finance, 2017
    • Adding a benchmark like Libor improves transparency in search markets and, under certain conditions, improves market efficiency.
    • Online Appendix | VOX Blog
13. What is the Optimal Trading Frequency in Financial Markets?, with Songzi Du, Review of Economic Studies, 2017, 84, 1606--1651 [+]
    • Kepos Capital Award for Best Paper on Investments, Western Finance Association, 2015
    • Yihong Xia Best Paper Award, China International Conference in Finance, 2013
    • What is optimal trading frequency in financial markets? It depends on the tradeoff between faster reaction to new information and a thicker market.
    • Supplemental Materials
14. Size Discovery, with Darrell Duffie, Review of Financial Studies, 2017, 30(4), 1095--1150 [+]
    • First Prize, AQR Insight Award, 2016
    • "Size discovery" mechanisms like "workup," "matching sessions" and "dark pools" execute large trades at a fixed price. By giving up price discovery, size discovery mitigates concerns about price impact and improves allocation efficiency.
    • Online Appendix
15. Shades of Darkness: A Pecking Order of Trading Venues, with Albert Menkveld and Bart Zhou Yueshen, Journal of Financial Economics, 2017, 124(3), 503--534 [+]
    • TCW Best Paper Award, China International Conference in Finance, 2015
    • Best Paper Award, Finance Down Under conference, 2015
    • We propose and test a "pecking order" hypothesis of trading venues: Lit, dark, and darker.
16. Bilateral Trading in Divisible Double Auctions, with Songzi Du, Journal of Economic Theory, 2017, 167, 285--311 [+]
    • Existing models of divisible double auctions typically require three or more traders. We characterize a family of non-linear, ex post equilibria in a divisible double auction with only two traders.
17. Commodities as Collateral, with Ke Tang, Review of Financial Studies, 2016, 29(8), 2110--2160 [+]
    • In the presence of capital control and financing frictions, financial investors import commodities and use them as collateral to earn a risk premium.
18. Do Dark Pools Harm Price Discovery?, Review of Financial Studies, 2014, 27(3), 747--789 [+]
    • First Prize, Morgan Stanley Prize for Excellence in Financial Markets, 2011
    • A dark pool can improve price discovery by concentrating informed traders on the exchange.
    • Online Appendix | Matlab Code
19. Finding a Good Price in Opaque Over-the-Counter Markets, Review of Financial Studies, 2012, 25(4), 1255--1285 [+]
    • Review of Financial Studies Young Researcher Prize, 2013
    • Returning to a rejected offer leads to a worse offer. Search exacerbates adverse selection in OTC markets.
20. Does a Central Clearing Counterparty Reduce Counterparty Risk?, with Darrell Duffie, Review of Asset Pricing Studies, 2011, 1(1), 74--95 [+]
    • Michael Brennan Best Paper Award, Review of Asset Pricing Studies, 2012
    • Central clearing of small derivatives classes can increase, rather than reduce, counterparty exposures.
21. A New Perspective on Gaussian Dynamic Term Structure Models, with Scott Joslin and Ken Singleton, Review of Financial Studies, 2011, 24(3), 926--970 [+]
    • The no-arbitrage restriction alone does not help predict bond yields in Gaussian term structure models.
    • Online Supplement | Sample Matlab Code