Execution and Exchanges - Articles & White Papers

Circuit breakers re-entered the policy debate in spring 2020 because of the heightened volatility experienced by financial markets in March 2020. Numerous trading halts took place in many markets worldwide. These events have led to a renewed interest in the usefulness and benefits of circuit breakers and in their design. The…

S&P Dow Jones Indices previous blog (part II) introduced SPACs’ lifecycles, as well as the potential benefits and risks of investing in SPACs. In this blog, they focus on SPACs’ liquidity. In general SPACs’ liquidity is poor when seeking the target, surges on the deal announcement date, and remains low relative to the S…

In March 2020, as the Covid-19 pandemic disrupted a range of financial markets, the ability of dealers to maintain liquid conditions in these markets was questioned. Reflecting these concerns, authorities took numerous steps, including providing regulatory relief to dealers. In this post, the authors examine liquidity…

The objective for this paper is to propose a blueprint for transaction cost analysis (TCA) metrics that will accurately assess and measure execution quality on both firm and last look liquidity. Compared to equity markets, FX TCA is still in its infancy and primarily captures execution costs on last look liquidity. With the…

Retail trading activity has soared during the COVID-19 pandemic. This paper quantifies the impact of the retail investment boom on the US stock market within a structural model. Using account holdings data from the online trading platform “Robinhood Markets Inc.” and 13F filings, the authors estimate retail and institutional…

While algorithmic trading now dominates financial markets, some exchanges continue to use human floor traders. On March 23, 2020 the NYSE suspended floor trading because of Covid-19. Using a difference-in-differences analysis, the authors find that floor traders are important contributors to market quality. The suspension of…

The term decentralized finance (DeFi) refers to an alternative financial infrastructure built on top of the Ethereum blockchain. DeFi uses smart contracts to create protocols that replicate existing financial services in a more open, interoperable, and transparent way. This article highlights opportunities and potential…

This quarterly update is a must-read for investors wishing to stay up to date with the latest regulatory, industry and market structure topics. The 'Quarterly Assessment' covers the post-Brexit impact on the international bond market, and there are separate features on the post-Brexit impact on the primary markets…

The trading desk has always been willing to embrace what actually works, benefiting performance, liquidity, speed, price, and client service together with what supports new investment ideas (front office) and automation of workflows (middle and back office). Greenwich Associates asked 234 equity and fixed-income investors…

For the webinar, please scroll to the bottom of the page after clicking the URL. 2020 marked an inflection point in the electronic trading of corporate bonds, as it proved its value and resilience in ways it never had before. With the market poised for further growth and innovation, Kevin McPartland, Head of Market Structure…

Macfarlanes argue that we seem to be at an inflexion point in the UK equity markets. The pressures are well documented: the number of listed companies has fallen by about 40% from the peak; the constituent FTSE100 members bear no real resemblance to the broader UK economy; and the UK stock market is yet to capitalise on the…

Financial sector headlines are often dominated by banks and insurers. But there is one area that has emerged as a steady grower and dividend payer: financial exchanges. Exchanges’ gains contrast against steep declines in the broader financials sector, where traditional banks in particular have grappled with ultra-low rates…

Matthew Reid speaks to BidFX’ s Chief Revenue Officer, John McGrath on the evolution of FX in the buy side and how digitalization has given rise to an integrated multi-asset overview in the front office.

Owning individual bonds has its risks and rewards. However, buying a bond entails an unseen transaction cost, which may not always be clear to retail investors. This transaction cost exists because bonds are not typically sold with a commission. Instead, a markup is built into the bond price.This report offers a transparent…

Market makers play a central role in options markets, where they account for 99.9% of open orders. Providing liquidity at this scale is only possible because of quote protection (QP) mechanisms that limit how quickly open orders can be filled — say, in the event of a market crash or system failure. But existing QP mechanisms…

The firms listed on the stock market in aggregate contribute less to total non-farm employment and GDP now than in the 1970s. A major reason for this development is the decline of manufacturing and the growth of the service economy as firms providing services are less likely to be listed on exchanges. A firm’s stock market…

Prior research suggests that ETF arbitrage affects the market quality of underlying securities. The authors directly test this proposition by examining minute-by-minute returns and order imbalances, but find little evidence that trading in ETFs impacts the underlying. Panel vector autoregression shows ETF returns largely…

Using a novel proprietary transaction-level dataset from UK equity markets, the authors of this report analyze the impact on transaction costs of (i) venue choice (ii) a recent ban on dark pool trading (the ‘Double Volume Cap (DVC)’). They show that decisions to trade on venues with lower levels of pre-trade transparency are…

The rapid growth in exchange-traded fund (ETF) markets creates potential risks to investor protection and financial stability. In Aquilina et al. (2020), using a unique transactions dataset, the authors showed that ETF primary markets are highly concentrated, particularly for fixed income ETFs, where concerns about ‘…

The use of algorithms in trading is pervasive in today’s markets. Any analysis of the role that algorithmic trading plays in the US equity and debt markets requires an understanding of equity and debt market structure,3 the role played by different participants in those markets, and the extent to which algorithmic trading is…