The Securities and Exchange Commission unveiled a new website yesterday afternoon to provide investors and others with the ability to interactively explore a range of new market metrics and access empirical research and analyses that further inform the broader public debate on market structure.
The new website located at www.sec.gov/marketstructure will serve as a central location for the SEC to publicly share evolving data, research, and analysis as the agency continues its review of the equity of market structure. The data and related observations address the nature and quality of displayed liquidity across the full range of U.S.-listed equities – from the lifetime of quotes and the speed of the market to the nature of order cancellations.
“We are launching what we believe to be a game changer that focuses the market structure debate as never before on data and analysis rather than anecdote,” said SEC Chair Mary Jo White, who unveiled the website at an SEC news conference. She was joined by officials from the agency’s Division of Trading and Markets and its Division of Economic and Risk Analysis.
“We’ve made great strides here at the SEC transforming how we take in market data, store it, and share it throughout the agency,” Chair White said. “By also making this information publicly accessible, two great things should happen. It should increase efficiency so people don’t have to struggle to find this information. And it should spur innovation by unlocking the power of data and research to unlock a wealth of ideas from investors, market participants, and academics.”
Earlier this year, the SEC launched its internal Market Information Data Analytics System (MIDAS), which for the first time provided the SEC with data about every displayed order posted on national exchanges. Every day, MIDAS collects one billion records time-stamped to the microsecond. The information comes from the consolidated tapes and proprietary feeds of each exchange and includes posted orders and quotes, modifications and cancellations, and trade executions both on- and off-exchange.
Typically, only sophisticated market participants have had access to all of this data, and even fewer have had the ability to process it. Through MIDAS, experts at the SEC have been extensively studying this data, and their research already has produced important results to help inform the agency’s thinking on market structure.
The next step in this market structure initiative is to disseminate the aggregated data and related observations drawn from MIDAS to the public. The SEC’s new website allows users to explore key market metrics and trends based on aggregate analyses of tens of billions of MIDAS records over the last year. With the click of a mouse, results are available in clear, easy-to-read charts and graphs.
Among the MIDAS-collected data that is generally unavailable on the public consolidated tape that the SEC’s new website will be making available broadly:
Ratios related to the number and volume of orders that are canceled instead of traded.
Percentage of on-exchange trades and volume that are not disseminated on the public tape (odd-lot trades).
Percentage of on-exchange trades and volume that are the result of hidden orders.
Quarterly distributions analyzing the lifetime of quotes ranging from one millionth of a second to one day.
The new website contains an interactive charting tool that allows users to compare and contrast data series according to the type of security, market capitalization, volatility, price, and turnover. Users also can explore detailed quote-life distributions, and download data series and quote-life distributions to perform their own analyses. Methodology documents that detail all calculations are provided.
The new website also features staff research papers based on a variety of data sources, and staff reviews that identify and assemble information from the expanding economic literature on market structure topics. One paper using order audit trail data on off-exchange trading provides key metrics describing the underlying nature of off-exchange trading by the 44 alternative trading systems that trade equity securities. The primary observation of SEC staff is that ATS trading looks very similar in many respects to exchange trading. Another paper summarizes current studies that address market fragmentation – both visible and dark.
The new website is just the beginning of this initiative with more studies and analyses to come. SEC staff is looking forward to receiving feedback about the website and its implications.
Joining Chair White to announce the launch of the SEC’s market structure data and analysis website were Division of Trading and Markets Acting Director John Ramsay, Division of Economic and Risk Analysis Director Craig Lewis, and Office of Analytics and Research Associate Director Gregg Berman.
Frank Nemecek examines financial matters. He also authors the ChiefMoneyNerd.com blog.