A Closer Look at How to Improve and Repair Market Structure
ROBERT SCHWARTZ: I am very much looking forward to our next speaker, Seth Merrin. Our friendship and working relationship go back a long way. As you well know, Seth is a pioneer in his field. In my opening remarks, I said we need more competition in the a
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A Closer Look at How to Improve and Repair Market Structure Seth Merrin
ROBERT SCHWARTZ: I am very much looking forward to our next speaker, Seth Merrin. Our friendship and working relationship go back a long way. As you well know, Seth is a pioneer in his field. In my opening remarks, I said we need more competition in the area of innovation. We need innovators. And so it was only natural for me to call Seth, who is a great innovator. He accepted my invitation without any hesitation. I’m now delighted to introduce Seth. SETH MERRIN: I told Bob that when I first started Liquidnet, my goal in life was to keynote his conference.1 And here I am! I have finally made it. It’s incredibly important to talk about market structure today. As you know, regulation has a very clear impact on market structure. And market structure has a very clear impact on efficient trading and capital formation. That ultimately affects our economy. We have to make this market structure as good as we possibly can. There’s a great quote that says, “Good is the enemy of great.”2 Market structure is better today than it has ever been, though there is still room for improvement. So I want to offer a couple of suggestions about what the buy-side, the regulators, and the venues could do to help enhance the market structure. Then I will open it up for questions. We have some incredibly smart people in the audience, and that’s a little bit intimidating! I want to talk about how we can repair markets. Sometimes, the markets have evolved organically. That’s all fine except that when you start from so long ago, way before technology was really involved in the markets, if you haven’t managed that growth over time, then it ends up sitting on top of a very shaky foundation. That could ultimately lead to a house of cards. Liquidnet was established in 2001. See more on http://www.liquidnet.com/#/about-us/ See James C. Collins, Good to Great: Why Some Companies Make the Leap…and Other Don’t. (HarperBusiness 2001). 1 2
S. Merrin (*) Liquidnet, New York, NY, USA
© Springer Nature Switzerland AG 2021 R. A. Schwartz et al. (eds.), Equity Trading Round-Up, Zicklin School of Business Financial Markets Series, https://doi.org/10.1007/978-3-030-51015-2_6
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S. Merrin
Like in the case of an architect who is constructing a building that doesn’t have any drawings, the outcome will be similarly shaky at best. There’s no way that the architects of market structure could have foreseen how these markets were going to evolve. I would say that we are at the intersection of two of the fastest-changing industries in the world, financial markets and technology. How could you possibly keep up with all of these changes? How could you possibly have put a foundation in place that could handle everything we’re doing today? Let’s talk about the term “positive destruction”. Sometimes it’s better, more efficient, and just easier to knock something down and start all over again from scratch. I’m not really suggesting that we throw out all of the market structure that we have
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