Abstract
The fragmented nature of the US equities exchange landscape has given rise to structural inefficiencies, creating the potential for conflicts of interest between market participants. The introduction of the Investors Exchange offers the opportunity to evaluate market quality across exchanges with varying fee structures. The chapter studies four dimensions of market quality—liquidity, execution costs, price discovery, and market stability—and examines structural mechanics responsible for disparities in execution quality. A trend is observed in venue stratification by fee structure: maker-taker exchanges dominate the US equities trading landscape despite greater adverse selection, less stability around executions, significantly longer queues at the inside, and a lower probability of execution in aggregate. This suggests that access fees and rebates perpetuate economic incentives misaligned with the tenets of best execution, and may promote activity detrimental to market quality. The chapter employs a publicly available dataset (Daily TAQ) to facilitate replication of our metrics.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
