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Examining the SEC's Proposed Order Competition Rule

Regulation (Washington. 1977), 2023-12, Vol.46 (4), p.5-6

COPYRIGHT 2023 Cato Institute ;Copyright Cato Institute Winter 2023/2024 ;ISSN: 0147-0590 ;EISSN: 1931-0668

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  • Title:
    Examining the SEC's Proposed Order Competition Rule
  • Author: Battalio, Robert ; Jennings, Robert
  • Subjects: Brokers ; Competition (Economics) ; Independent regulatory commissions ; Investors ; Liquidity ; Retail industry ; Securities ; Securities law ; Stock exchanges ; Stocks ; Wholesalers
  • Is Part Of: Regulation (Washington. 1977), 2023-12, Vol.46 (4), p.5-6
  • Description: The market for trading stock in the US is remarkably complex. As of July 2023, there were 16 registered public exchanges like the New York Stock Exchange, 70 alternative trading systems (ATS) that act like private exchanges, and numerous other entities where equities securities can be bought and sold. Large institutional investors use their own trading desks and the trading desks of investment banks to source liquidity--that is, to exchange stock for money or vice-versa--across this array of choices. Individual investors (i.e., retail traders) typically rely on their brokers to route their orders, matching buyers and sellers with nearly similar bid and ask prices (with the trading platform getting a small payment for its services). There are economies of scale in the technology associated with this order routing and execution, meaning that the larger a trading entity is, the more cheaply and readily it can match buyers and sellers. Retail brokers have come to rely on a set of electronic marketplaces known as "wholesalers" to execute their customers' liquidity-demanding orders promptly at, or better than, the quoted price. The largest of these wholesalers are Citadel, G1XSusquehanna, Jane Street, Two Sigma Securities, UBS, and Virtu Financial.
  • Publisher: Washington: Cato Institute
  • Language: English
  • Identifier: ISSN: 0147-0590
    EISSN: 1931-0668
  • Source: Freely Accessible Journals
    ProQuest Central
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