Execution and Exchanges - Articles & White Papers

State Street experts explore the components of a front-to-back collateral management optimisation framework and the benefits of emerging alternative avenues to liquidity markets.

Market data and access to market data are necessary to trade in the secondary markets. Market data is an essential element of efficient price discovery and helps to support fair and efficient markets. Market participants, including investors, need timely access to market data to make investment, order routing and trading…

The authors analyse the reaction of retail investors to price changes at the intraday level using hourly data on the number of investors holding a given stock on the Robinhood platform. The authors observe that (i) Robinhood users tend to open new positions on stocks exhibiting extreme returns in the past hours, (ii) this…

This paper documents important differences in payment for order flow (PFOF), spreads, and price improvement across asset classes. In stocks, the authors show that PFOF is small. While many retail trades are executed off-exchange, the authors find that they receive meaningful price improvement, particularly when spreads are…

This paper documents rapid increases in (i) retail investor trading in options and in (ii) payment for order flow (PFOF) for options transactions received by the U.S. retail brokerages. PFOF comes from so-called wholesalers/internalizers – market makers who execute order flow for a retail brokerage. The findings suggest that…

Finbourne compiled actual corporate bond post- trade data from major APAs, MTFs and OTFs from 1 March 2021-31 December 2021. This represents over €1 trillion of volume, more than 1.2 million trades and over 5,500 different bonds/ISINs. The main goal of this analysis is to provide data on the length of time expected to take…

The authors show that larger trades incur lower trading costs in government bond markets (‘size discount’), but costs increase in trade size after controlling for clients’ identities (‘size penalty’). The size discount is driven by the cross‑client variation of larger traders obtaining better prices, consistent with theories…

The Wholesale Markets Review was established to improve the UK’s regulation of secondary markets, taking advantage of our new freedoms in financial services following Britain's withdrawal from the EU.

The Quarterly Assessment is on the transition from LIBOR in the bond market. There are international capital market features: on Russia-Ukraine: sanctions effects on markets; on CSDR mandatory buy-ins: v 2.0; on the GMRA: marking 30 years of service; on developments and trends in the Asian international bond markets; on…

The European Securities and Markets Authority makes its final report on the mechansims and rules surrounding short selling.

The study explores the underpinning interlinkages in the spot and futures markets across nine Asian advanced and emerging economies, and examines whether development status has any impact on the nature and speed of adjustments in the information transmission. By applying Panel VECM to the data set from the very day futures…

The paper analyses the importance and urgency of setting up a foreign exchange (FX) futures market in China. It also examines the impact of FX futures markets on the volatility of spot markets. Additionally, the authors suggest that regulatory design changes are necessary for the establishment of a well-functioning FX…

In March of 2020, international markets seized up with a violence unequaled since the global financial crisis (GFC) nearly a dozen years before. As economies around the world locked down in the face of the potentially deadly but completely novel SARS-CoV-2 virus, stock markets fell, firms and governments scrambled for cash,…

Inside this report, SIFMA recaps the 2021 market metrics for volatility, market performance, volumes (equities, off-exchange trading, ETFs, and listed options), and capital formation. SIFMA also highlights key themes seen across each of these sectors. The report then looks ahead to 2022, gauging what could be the new normal…

When people ask about cryptocurrencies, or digital assets more broadly, they generally ask about what’s in the news. Sometimes, it’s about a popular meme coin (e.g., Doge); other times, it’s about non-fungible tokens (NFTs) and the digital artworks that are seeing surprising prices; and still other times, it’s about the new…

Options trading's explicit costs have plummeted to near zero, but what about implied transaction costs?

Companies participating in the rapidly developing digital asset ecosystem are enabling a new era of global online trust that, in turn, is creating utility for consumers, reshaping business models, reorganising competitive dynamics, and redistributing value across industries. Innovative 'pick and shovel' companies…

The authors show how current market practices relating to odd lot quotes result in a large 'inside' market where for many stocks better prices routinely exist relative to the National Best Bid or Offer (NBBO). They provide strong evidence that being able to see these odd lot quotes provides valuable information to…

A short squeeze occurs if borrowed shares are recalled and the short seller is unable to find another source of shares. This forces the short seller to terminate a position early. For most stocks most days, the probability of a short squeeze is very low. Short squeezes, however, are not unusual for the hardest to borrow…

The authors review empirical findings regarding the impact of post-2008 financial regulations on the liquidity of corporate bond markets in the U.S. They first show that traditional measures of market liquidity improved in recent years. At the same time, the cost of illiquidity also increased. The authors then discuss…