The race to zero - speech by Andy Haldane

In a speech at the International Economic Association Sixteenth World Congress in Beijing, Andrew Haldane - Executive Director for Financial Stability and member of the interim Financial Policy Committee - outlines how dramatic shifts in the structure and speed of trading have increased abnormalities in the pricing of securities. This new topology of trading has potentially increased systemic risk. He then discusses several policy options to manage the impact of these developments on market dynamics.
Published on 08 July 2011

The driving forces of change have been trading structure and trading speed. Changes in the structure of trading lay in two key regulatory changes: the 2005 Regulation NMS (National Market System) in the US and the European MiFID (Markets in Financial Instruments Directive) in 2004. These aimed to increase competition in, and attract new entrants to, the trading landscape. They effectively ended the central trading exchanges' 300-year monopoly over trading activity, ushering in ".a diverse and distributed patchwork of exchanges and multilateral trading platforms." with a diverse range of execution characteristics.

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