What We Think About the Quality of Our Equity Markets

Abstract

Have the technological and regulatory changes in the U.S. equity markets in recent years improved or impaired market quality? As “market quality” is an ambiguous concept that is neither readily quantifiable nor amenable to straightforward empirical analysis, the authors have surveyed the opinions of sell–side and buy–side participants and academic financial economists. Academic respondents in general, and the microstructure subset in particular, are relatively positive about market quality and the efficacy of regulatory initiatives. The predominant response on both the sell–side and the buy–side is that the quality of the U.S. equity markets has deteriorated in recent years. Technology is broadly thought to be a great tool, but many industry participants believe that market structure regulation is not helping.