Market Structure Is the Topic for SEC Speech

In addition, some of the rules that apply to exchanges and market makers do not apply, yet, to some of these other electronic exchange-like entities. Should, for example, these electronic entities be allowed to just stop trading in times of stress–when exchanges and market makers must continue to make a market? Some of the firms that are “very active” in providing liquidity are not even broker-dealers, Schapiro said. Should they be allowed to “fall entirely outside the regime for regulated entities,” like exchanges or market makers?

Schapiro also noted that electronic trading systems at high frequency trading firms can “generate more than a million trades” a day, and “represent more than 50 percent of equity market volume.” But they often make, and then, in fractions of a second or mere seconds, cancel some of those orders. “Many firms,” Schapiro said, “will generate 90 or more orders for each executed trade.” That means “a firm that trades one million times per day may submit 90 million or more orders that are cancelled.”