Market structure faith rises while maker-taker faith falls

Faith in the US equities market structure has risen considerably in the past 12 months, according to the findings of a recent survey by industry analyst firm the TABB Group.
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Faith in the US equities market structure has risen considerably in the past 12 months, according to the findings of a recent survey by industry analyst firm the TABB Group.


Of the 232 buy-side, sell-side, trading venue, vendors and industry watchers polled by the research group, 56% have either ‘high’ or ‘very high’ confidence in today’s market structure compared to 18% who had either ‘weak’ or ‘very weak’ confidence.

“About a quarter of the respondents, 26%, had a neutral view on the matter,” said Sayena Mostowfi, senior analyst at the Tabb Group and co-author of the study. “Most of those who answered the question negatively were from the media.”

Buy-side participants responded similarly to the aggregated total with 48% having high or very high confidence, 24% with a neutral opinion and 24% with a weak confidence, she added.

This survey market marks the sixth time that the Tabb Group has as done such a survey.

“We first began surveying after the 2010 flash crash,” said Valerie Bogard, a research analyst at the TABB Group. “After that, we surveyed the industry after ever subsequent market event like the Facebook IPO, Knight Trading’s rouge algorithm and last year’s hash crash as well as just prior to the publication of Michael Lewis’ ‘Flash Boys’.”

The recent confidence level is much higher than it had been in 2013, she said. “We saw the lowest point in April 2013, right after the hash crash. Only 30% of those polled had a high confidence in the market’s structure.”

Mostowfi attributes the improvement to Securities and Exchange Commission Chair Mary Jo White’s clear-eyed and data-driven approach to market reform.

“We decided to do this survey after she presented her 13 market structure directives in her 5 June speech,” she said.

The survey contained questions regarding each directive. The question that elicited the strongest response from those polled was whether to eliminate the maker-taker rebate and fee model currently used by all US equities exchanges. A solid 60% of respondents are in favour of eliminating the maker-taker model compared to the 28% who think it would be a bad idea.

“We found that group had the most exchange and trading venue operators in it,” explained Mostowfi.

Only 12% of those surveyed had no opinion on the matter.

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