Are Reg NMS And The Explosion Of Various ATS The Source For The Stock Market's Volume Explosion?
A useful chart from Themis Trading presents the exponential jump in stock volume since the adoption of Reg NMS and the appearance of various ECN/ATS middlemen, whose primary goal in life is to scalp spread... sorry, provide liquidity to an extent never seen prior to 2007. It is these very organizations, and the scores of micro traders who make money only courtesy of the resultant increased daily speculation and momentum escalation, that are now screaming about the implications of what proposed Reg NMS 2 would do to their top and bottom line, for obvious reasons. The explosion in volume of course is not synonymous with an increase in liquidity, unless one counts the "huge" benefit that one gets by trading Citi in 20 different exchanges (Citi alone accounted for 20% of NYSE volume today). The "strange attractor" of HFT, in which a HFT dominated stock attracts more HFT strategies with the flip of a switch, is the only "benefit" of magnified "liquidity", while the threat of massive systemic imbalance as every single trader jumps on the same side of the trade, as highlighted recently by traders such as Wilmott and many others, continues growing ever larger. It is time to take the market back from all these various tolling operations which provide absolutely no real benefits to the market.