Against the Duopoly

Abstract

The US Regional Stock Exchanges and equity ECNs have been the princesses at the ball of late. With the acquisitions of INET and BRUT by NASDAQ and ArcaEx by the NYSE, the remaining entities with the regulatory authority to be an equity execution venue have never been hotter. The economics for these firms however remains troublesome, as none alone have enough order flow to create a growth-oriented business. Rather, they all appear to be serving the purposes of their owners, whether brokers or quant trading firms, or still struggling to find a partner with deep pockets. In this article we discuss revenue opportunities for ECNs, Regionals and the brokers that have invested in them. We also give our projections for the next round of industry consolidation.