Equity Venues > 55
March 17, 2008
There are now more than 55 venues in the U.S. equities market, according to a recent report from New York-based Tabb Group. "The popular myth that the markets will centralize again is probably incorrect," said Tabb Group CEO and founder Larry Tabb, author of "U.S. Equity Market Structure: Driving Change in Global Financial Markets." With the growing number of execution destinations, noted Tabb, "the way traders now access the financial markets has changed radically."
Tabb said that the markets "actually look like they are going into something we're calling consolidated proliferation,' where you wind up with a single liquidity pool that has two or three different trading models within it. You get the economics of consolidation, but you get the multiple business models ... so that the arbitrage liquidity just doesn't disappear."
In such an environment, "the goal is to get all of that on to the same hardware platform and data center but maintain different liquidity pools," Tabb explained. He cited the Nasdaq Stock Market, with its main exchange and opening and closing crosses, as an example of consolidation proliferation.
The number of trading platforms, new smart-order routing technology and the low-latency infrastructure needed to analyze trading opportunities have "made the old-school method of phoning a stock exchange floor broker for a trade execution as ludicrous as a horse and buggy competing in the Daytona 500," says the report. "Not only can't they win, but they have a greater chance of harming everyone around them."
