Equity trading: Like a horse and buggy in the Daytona 500

Despite the volume of high-profile mergers and acquisitions between exchanges, the number of trading venues in the US is an astonishing 55 and rising. According to industry consultant Larry Tabb: "The US financial markets are not just in flux; they are in full-out, no holds-barred, free-for-all radical change." Moreover, it is a trend that he believes is likely to be exported.

Nasdaq’s recent acquisitions of the Philadelphia and Boston exchanges and NYSE Euronext’s acquisition of the American Stock Exchange are prime examples of consolidation at the ownership level that have not led to a decrease in fragmentation. Although both groups have announced that they will attempt to consolidate operations and technologies, neither plans to eliminate markets or to consolidate liquidity pools, despite the benefits of increased scale that would result, which were often cited in the past as the main rationale for exchange mergers.

The...