Equity Trading in the 21st Century: An Update

James Angel (), Lawrence E. Harris () and Chester S. Spatt ()
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Lawrence E. Harris: Marshall School of Business, University of Southern California, USA
Chester S. Spatt: Tepper School of Business, Carnegie Mellon University, USA

Quarterly Journal of Finance (QJF), 2015, vol. 05, issue 01, 1-39

Abstract: This paper updates our previous study, "Equity Trading in the 21st Century", which presented results about US equity market quality. Despite many complaints in the national media, various measures of market quality indicate that US markets continue to be very healthy. Trade transaction cost estimates have stayed low and market depth and execution speeds remained high. New findings that measure the total transaction cost of executing very large block orders indicate that improvements in market quality also have benefited large institutional traders. While still high, both the number of quotes per trade and per minute have declined substantially from their peaks in 2008. Intraday volatility is below the levels of the pre-electronic 1990s. Although market quality is quite good, it could be enhanced. We discuss some current concerns about maker/taker pricing, dark pools, high frequency trading, tick sizes, designated dealers, transaction taxes, IPOs, and market stability.

Keywords: Stock exchanges; equity market quality; bid-ask spreads; transactions costs; maker/taker pricing; high-frequency trading; dark pools; tick size; regulation (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1142/S2010139215500020

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