Equity Trading in the 21st Century

Author:

Angel James J.1,Harris Lawrence E.2,Spatt Chester S.3

Affiliation:

1. McDonough School of Business, Georgetown University, USA

2. Marshall School of Business, University of Southern California, USA

3. Tepper School of Business, Carnegie Mellon University, USA

Abstract

The US equity market has changed dramatically in recent years. Increasing automation and the entry of new trading platforms have resulted in intense competition among trading platforms. Despite these changes, traders still face the same challenges as before. They seek to minimize the total cost of trading, including commissions, bid/ask spreads, and market impact. New technologies allow traders to implement traditional strategies more effectively. For example, dark pools and indications of interest are just an updated form of tactics that NYSE (New York Stock Exchange) floor traders used to search for counterparties while minimizing the exposure of their clients' trading interest to prevent front running. Virtually every measurable dimension of US equity market quality has improved. Execution speeds and retail commissions have fallen. Bid-ask spreads have fallen and remain low, although they spiked upward along with volatility during the recent financial crisis. Market depth has increased. Studies of institutional transactions costs find US costs among the lowest in the world. Unlike during the Crash of 1987, the US equity market mechanism handled the increase in trading volume and volatility without disruption. However, our markets lack a market-wide risk management system that would deal with computer-generated chaos in real time, and our regulators should address this. "Make or take" pricing, the charging of access fees to market orders that "take" liquidity and paying rebates to limit orders that "make" liquidity, causes distortions that should be corrected. Such charges are not reflected in the quotations used for the measurement of best execution. Direct access by nonbrokers to trading platforms requires appropriate risk management. Front running orders in correlated securities should be banned.

Publisher

World Scientific Pub Co Pte Lt

Subject

Strategy and Management,Economics and Econometrics,Finance

Cited by 188 articles. 订阅此论文施引文献 订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献

同舟云学术

1.学者识别学者识别

2.学术分析学术分析

3.人才评估人才评估

"同舟云学术"是以全球学者为主线,采集、加工和组织学术论文而形成的新型学术文献查询和分析系统,可以对全球学者进行文献检索和人才价值评估。用户可以通过关注某些学科领域的顶尖人物而持续追踪该领域的学科进展和研究前沿。经过近期的数据扩容,当前同舟云学术共收录了国内外主流学术期刊6万余种,收集的期刊论文及会议论文总量共计约1.5亿篇,并以每天添加12000余篇中外论文的速度递增。我们也可以为用户提供个性化、定制化的学者数据。欢迎来电咨询!咨询电话:010-8811{复制后删除}0370

www.globalauthorid.com

TOP

Copyright © 2019-2024 北京同舟云网络信息技术有限公司
京公网安备11010802033243号  京ICP备18003416号-3