New York, NY, USA
September 1, 2004
The US Equity Markets: Overview and Trends
Report Published by Celent
Celent Communications discusses trends in the
equity markets and predicts who stands to win and lose in the face of
Regulation NMS.
The US equity markets are huge and
incredibly dynamic. Regardless of their role in the equities markets,
firms are struggling with the way technology is changing their business
models. The passage of Regulation NMS and the launch of NYSE’s hybrid
system are creating an atmosphere that will completely change the face of
this market.
In a new report, The US Equity
Markets: Overview and Trends, Celent provides a beginner’s
overview of the equities markets. The report discusses the US equity
markets’ structure, major players, competition, recent trends, and
upcoming events. Major players include exchanges, ECNs, market makers,
specialists, brokers, market aggregators, and block trading platforms. The
economic models of specialists, ECNs, and exchanges are analyzed, with
special attention paid to their revenue drivers and future challenges.
Celent asserts that Regulation NMS
creates many more losers than winners. Broker-dealers will benefit
specifically in the area of market data, but ECNs are more hurt than
helped by the reform. Certain technology vendors and the NYSE also are at
risk. A breakdown of Reg NMS’ impact on equities market players:
|
WINNERS UNDER
REGULATION NMS |
| Large
Broker-Dealers |
Ability
to sell market data provides a new revenue source. Market data cost
will decline significantly when SIP data feeds become cheaper. |
| ECNs |
Trade-through
rule modifications allow them to more easily compete for listed
order flow. |
|
LOSERS UNDER
REGULATION NMS |
| ECNs |
Can
no longer quote in sub-pennies, removing a differentiator. Access
fees, a major source of revenue, are capped. Ability to rebate for
liquidity is removed, putting order flow at risk. |
| NYSE |
Forced
to revamp its market structure to qualify as a fast market, putting
its trading model at risk. |
| Floor
brokers and specialists |
At
risk for obsolescence as exchanges become electronic. |
| Smart
order routing vendors |
Expansion
of trade-through rule reduces routing choices and therefore reduces
need for this technology. |
| Block
trading platforms |
Changes
to the "fair access" threshold may force these platforms
to accept "undesirable" customers. |
| Source:
Celent Communications |
According to Jodi
Burns, Celent analyst and author of the report, "Although
Regulation NMS is not likely to become a reality until mid-2005, this
reform will have a significant impact on the US equity markets and its
importance cannot be overstated. Some firms will be put out of business,
and others will be forced to stay afloat through acquisition."
The 37-page report contains 16 figures and four
tables.
A Table of Contents
is
available online.
|
