The US Equity Markets

September 1, 2004


New York, NY, USA September 1, 2004

: Overview and Trends

Celent Communications discusses trends in the equity markets and predicts who stands to win and lose in the face of Regulation NMS.

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, : Overview and Trends, Celent provides a beginner’s overview of the equities markets. The report discusses ’ 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:

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 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.


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.


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

of Celent Communications' Retail Securities & Investments, and Institutional Securities & Investments research services can download the report electronically by clicking on the icon to the left.  Non-members should contact for more information.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents


New York, NY, USA September 1, 2004

Return to report Abstract


  Exchanges 5
  Electronic Communications Networks 10
  Market Makers and Specialists 13
  Brokers 16
  Securities Information Processor 17
  Market Aggregators 18
  Block Trading Systems 18
  NASDAQ Stock Market 21
  Archipelago Exchange 24
  New York Stock Exchange 26
  Sharing of Market Data Revenue 27
  Downward Pressure on Transaction Prices 28
  ECNs Partnering With Exchanges 29
  Regulation NMS 29
  NYSE Transition to a Hybrid Market 29

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