Confidence in U.S. equity market structure highly polarized since May 6 crash: survey

Date: Friday, May 28, 2010
Author: Investment Executive

In the wake of the “flash crash” on May 6, market players don’t have a great deal of confidence in the U.S. equity market structure, a survey by TABB Group finds.

The survey, which was conducted in the week of May 13 and released Thursday, finds that barely half of the respondents have a high degree of confidence in the current market structure.

According to Adam Sussman, TABB’s director of research, “Within that group, the asset management community has the least confidence as only 44% of the buy-side has a very high or high level of confidence in the U.S. equity market structure. At TABB, we believe this is particularly demoralizing, given that the buy side are guardians over much of the equity investments in the United States.”

TABB reports that the survey also found that: 73% do not believe market structure strongly supports an orderly market; and, 44% believe that market structure is not a level playing field, up from 34% in a 2009 survey.

Following the May 6 crash, 62% of the buy-side participants are now negative toward high-frequency trading (although the sell side and execution venues remain positive in their views on HFT).

TABB also notes that there is consensus that high frequency traders should register as broker dealers; 50% of the buy side strongly supports HFT quoting obligations; nearly a third of the buy side community is in favor of banning co-location; depth of book trade-through garnered support from the buy side and execution venues, not the sell side; and most participants have a positive or neutral view (83%) on the elimination of stub quotes and the large trader reporting rule.