There are more than 55 different execution venues competing to match buyers and sellers and trade equities electronically in the US, according to a new report from analyst group Tabb.
Larry Tabb, CEO founder of the capital markets research and advisory firm, says the US financial markets are in "full-out, no-holds-barred, free-for-all radical change".
"With these 55+ millisecond-matching US equity trading platforms competing against each other and new electronic strategies enabling brokers, investors and markets themselves to connect and trade, the way traders now access the financial markets has changed radically," he adds.
Tabb says the proliferation of equity execution venues, along with significant investment in scheduling and smart order routing technology, not to mention the market data infrastructure and millisecond speeds necessary to read and analyse trading opportunities "has made the old-school method of phoning a stock exchange floor broker for a trade execution as ludicrous as a horse and buggy competing in the Daytona 500".
"Not only can't they win, but they have a greater chance of harming everyone around them," says Tabb.
It is absolutely critical for Wall Street hedge funds and money managers to understand market structure nuances, says Tabb. As professionally-managed equity assets continue to expand and buy-side traders increasingly need to know how to negotiate the rapidly changing market structure.
"It often means the difference between beating their benchmarks - or merely matching them," he adds.