Plato Partnership Releases Independent Research on Market Dynamics and Speed Bumps
London, UK, 20/02/2024: Plato Partnership (‘Plato’), the not-for-profit member organisation bringing creative solutions and efficiencies to today’s equity marketplace, today published independent academic research on the impact of speed bumps for market quality. The study, titled “Are Speed Bumps Beneficial?” delves into the theoretical and empirical literature surrounding speed bumps and their implications for market dynamics.
The study has been conducted by Fatemeh Aramian, Postdoctoral Researcher at the University of Melbourne, and Carole Comerton-Forde, Professor of Finance at the University of Melbourne.
The research includes:
In-Depth Analysis: The research paper provides a thorough review of speed bumps - deliberate delays in processing order messages on an exchange - and their influence on market quality.
Policy Recommendations: Based on existing academic evidence, the paper offers essential policy recommendations, emphasizing the need for cautious evaluation and regulatory oversight of speed bump proposals.
Alternative Approaches: The study identifies alternative strategies to address latency arbitrage, such as liquidity protection programs and micro-burst fees, highlighting their potential benefits in preserving market integrity.
Regulatory Considerations: It underscores the importance of evidence-based policymaking and collaboration among regulators and market participants to mitigate the adverse effects of latency arbitrage while maintaining market quality.
Mike Bellaro, CEO of Plato Partnership, said “Speed bumps have the potential to enhance competition and protect slower liquidity providers. However, their implementation requires careful consideration of the broader market impact and potential unintended consequences. As an advocate for market integrity and investor protection, Plato is committed to supporting independent research that informs policy decisions and promotes market transparency.”
This research provides valuable insights into the intricate relationship between speed bumps and market quality, shedding light on the complexities of modern market structure. By examining the empirical and theoretical evidence and offering thoughtful policy recommendations, this study serves as a vital resource for regulators, market participants, and policymakers navigating the evolving landscape of capital markets.
Want to get involved in Plato’s MI3 Market Innovator academic research programme? Reach out to info@platopartnership.com
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