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New Updated Study Underscores Robust Health of the US Equity Markets

A study commissioned by the Knight Capital Group, Inc. and co-authored by professor Chester S. Spatt, the Pamela R. and Kenneth B. Dunn Professor of Finance at Carnegie Mellon University’s Tepper School of Business, finds through various measures of market quality that the U.S. equity markets continue to be very healthy. The research, titled “Equity Trading in the 21st Century: An Update” builds on the empirical results of a 2010 study, conducted by the same authors, incorporating the most recent data and accounting for market dynamics.

          “Despite the controversies in recent years about high-frequency trading and dark pools our study shows that traditional metrics of equity market quality such as trading costs, and bid-ask spread have remained strong.  

          We recognize that equity market structure is very delicate and that it is important to protect the market competition that has led to these findings and conclusions.  At the same time, market quality can be further enhanced by limiting the extent   to which speed is rewarded.  The necessity of large investments in rapid technologies due to the rewards to speed can be dissipative and impose competitive barriers.  

           A uniform exchange pricing standard that would bar maker/taker pricing and taker/maker pricing would eliminate important distortions in routing decisions across trading platforms and make the costs of trading more transparent.” – Chester S. Spatt

Co-authors of the study include James J. Angel, associate professor at Georgetown University’s McDonough School of Business and Lawrence E. Harris, the Fred V. Keenan Chair in Finance and professor of finance and business economics at the University of Southern California’s Marshall School of Business.

 Additional information is provided in a press release titled: “Updated Study Underscores Health Of The U.S. Equity Markets” issued by Knight Capital Group, Inc., June 27, 2013.