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| Jon Macaskill is one of the leading capital markets and derivatives journalists, with over 20 years’ experience covering financial markets from London and New York. Most recently he worked at one of the biggest global investment banks |
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The dislocation in US equity trading on May 6 has caused much wringing of hands among market participants and supervisors. It was an unwelcome reminder of how little regulators know about the markets they oversee and how complacent industry insiders become when innovation takes place against a backdrop of steady or rising prices.
Like many changes that cause dislocation the move towards fracturing of the US equity markets took place in plain sight. Hedge funds such as Renaissance do not volunteer details of their algorithmic trading systems but dispersion of stock liquidity to multiple competing venues occurred openly. Most big banks now openly tout their ability to route trades at speed to the exchange or platform with the best price, even if they do not advertise how their own trades or those of their highest-margin clients feature in the pecking order for execution.
