The initiative aims to improve public understanding of how the nation's increasingly complex and fragmented stock markets actually work, Securities and Exchange Commission Chair Mary Jo White said Wednesday.
Her announcement during a keynote speech to a Securities Traders Association conference in Washington followed several major financial market failures that have shaken public confidence. They include the electronic breakdown that triggered a three-hour August freeze in stocks listed on Nasdaq, the nation's second-largest exchange.
"The U.S. equity markets are rightly considered the envy of the world in terms of the companies they attract and their broad investor participation," said White. But she added that "there are signs that require our attention" — including an annual decline in Americans investing in stock markets since 2007 and a roughly 39% drop in the number of U.S.-listed companies.
White said the market data and analysis reports had been developed through the agency's market information and data analysis program, a sophisticated computer system known as MIDAS that started operating in January. In part, the SEC developed the system to gain understanding of high-frequency traders who dart in and out of stocks in milliseconds and now represent more than half of all trading volume.
Beginning as early as next week, White said investors would have access to an SEC analysis that tracked the total volume of stock transaction orders at all price levels sent to public exchanges and then compared the result to the total volume of shares actually traded. Not surprisingly, the analysis found that most of the orders are canceled, and just a small percentage result in trades.
Less expected, she said, was the finding that cancellation rates for orders in exchange-traded products, such as securities that ! track a stock index, generally can be five times higher than similar rates for corporate stocks.
Investors will also have access to data that compares the speed at which exchange orders are canceled to the speed at which orders are executed.The data shows that more than one-quarter of all exchange-based trades in corporate stocks are executed against orders that have rested for a half-second or less. That shows that while financial markets are faster, "even short-lived quotes are generally accessible by at least some traders," said White.
"We expect this new tool to transform the debate on market structure by focusing it as never before on data, not anecdote," said White.
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