Understanding Today's Market Structure

Understanding Today’s Market Structure

Domain 8: Capital Markets and Market Structure


Joseph Mecane, Head of Execution Services, Citadel Securities

Timothy Reilly, Senior Director, Institutional Equities, New York Stock Exchange

Moderator: Jason Oury, Managing Director of Global Advisory, IHS Markit

  • Tim Reilly offered an overview of NYSE trading trends, particularly the fact that liquidity has become clustered into the half hour at the day’s end. He noted that fund NAV, index prices, derivatives, employee compensation and corporate benchmarks are just a few of the metrics based on closing prices, contributing to end-of-day trading. Due to COVID-19, opening auctions this year have been smaller, more diverse (e.g., retail trading through Robinhood) and more global. Trading in “a handful of stocks” considered at risk due to the pandemic is fueled by the overnight news cycle, so their volume in the first 10 minutes may be twice as high as in 2019.
  • Joe Mecane oversees Citadel’s execution services (client-facing equity, options, FX and ETF businesses); in fact, Citadel is the second-largest designated market maker on the NYSE floor. Mecane discussed the “feedback loop” of increased trading automation, passive investing (e.g., ETF arbitrage) and options activity among the factors that have moved trading volume toward the closing auction – and that can move your stock’s price. However, he added that “the United States has the most liquid markets in the work and the best spreads.” Mecane also cautioned the audience to avoid over-drawing conclusions from current market data. Retail trading has gone from the “low teens” as a percentage of total activity two years ago to as high as 20%-25% -- but it’s likely that the mix change has been exaggerated because non-retail participants have not been as active during the ongoing pandemic.