Electronic Market Microstructure

The latency, speed and movement, of sensitive data has seen it’s obvious effects on the general quality of execution. There are many drivers that include satisfy the need for speed, consistency, and systemic capacity or throughput. Any slow down in this speed can be a losing proposition for the executor. Along with competitive pressure there are regulatory requirements that need to be address that include: MiFID, Reg NMS and Decimalization. The result of these market infrastructure changes is that of putting unprecedented pressure on the speed of execution.

In historical times the transportation of data can be seen to be executed as much as today, and as important. Without Nathan’s Rothschild’s elaborate network of hilltop lantern semaphores, he would not of known the out come of the battle of Waterloo a full day before the British government themselves thus profiteering in an unprecedented way; data and data latency has and always be a crucial component in the execution process. Along with continuing growth of MTFs, ECNs and crossing networks a large fragmentation of liquity is happening. Terms like light, and dark pools are being used to describe the difficulty in finding and access these pools of liquity. There are even special tools the “sweep” and aggregate liquity pools for execution before the pool moves.