Broken Markets Regulatory Hangover推荐.pdfVIP

5 Regulatory Hangover The changes were subtle at first, but then it felt like a new world on Wall Street. • Volumes began to explode. In June 2007, just before Reg NMS was implemented, average daily volume across all exchanges was 5.6 billion shares per day. Two years later, in June 2009, it had increased more than 70%, to 9.6 billion.1 • Stocks were “flickering” more. Quotes were changing rapidly without any trades occurring. Bids or offers disappeared the instant an order was routed to them. Trading in any kind of size was becoming extremely difficult. • The market was becoming less personal. Institutional orders were being fed into algorithmic trading systems, which broke up the orders into smaller pieces sent into the market through- out the day. As these algos replaced block trading, the floor of the NYSE was not as relevant. Brokers and clients were talking to each other less. • HFTs were having a field day. While many institutional inves- tors thought they were hiding their intentions behind the algos, they were leaving a big fat trail of data “cookie crumbs” that the HFTs were quick to identify and profit from. The biggest changes were centered on the NYSE as it morphed from a slow, quote-driven market to a fast, automated computer service. Before Reg NMS, HFTs were largely confined to trading NASDAQ stocks because HFTs could work their strategies in only 83 84 Broken Markets fully automated fast markets. Now, an entire new set of large, liquid stocks—perfect for HFT strategies—opened up for them. We noticed these changes immediately and wrote a paper in 2008 titled “Toxic Equity Trading” to keep our clients in