The Structure of the Us Equity Markets

Rodney L. White Center for Financial Research Working Paper No. 17-00

31 Pages Posted: 12 Mar 2001

See all articles by Marshall E. Blume

Marshall E. Blume

University of Pennsylvania - Finance Department

Date Written: October 2000

Abstract

In 1975, Congress directed the SEC to develop a national market system in which all orders to buy or sell equities would interact. A national market system abhors fragmentation and assumes that one market will best serve the needs of all investors. Such an assumption does not capture the realities of modern markets. Investors have different needs and different markets will develop to serve these needs. Fragmented markets are a natural result of competition. Within the US, the sharing of trade and quote information among markets helps to mitigate any deleterious effects of fragmentation. The markets of tomorrow will be global. In a global market, the SEC will have to give up its goal of a national market system and focus on other issues. For example, it will be a challenge to provide just the sharing of trade information across borders. Further, technology will allow a market center or order gathering function to be located anywhere in the world. This threat of relocation will place constraints of US regulators, and global trading will make it more difficult for US authorities to regulate investment practices and to protect US investors.

Suggested Citation

Blume, Marshall E., The Structure of the Us Equity Markets (October 2000). Rodney L. White Center for Financial Research Working Paper No. 17-00, Available at SSRN: https://ssrn.com/abstract=263033 or http://dx.doi.org/10.2139/ssrn.263033

Marshall E. Blume (Contact Author)

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7616 (Phone)
215-573-8084 (Fax)

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