TABB Group Says Confidence Level in US Equity Market Structure is Highly Polarized Across the Marketplace since the May 6 Market Crash

  • Research Firm Surveys Wall Street Sentiment Ahead of June 2 SEC Roundtable
  • Participants Do Not Believe Current Market Structure Strongly Supports an Orderly Market
  • “Industry Barometer” Examines Buy Side and Sell Side Opinions Covering High Frequency Trading, Co-Location, Trade-At Rule, Depth of Book Trade-Through, Stub Quotes and Large Trader Reporting Rule

NEW YORK, May 27, 2010  – With the Securities and Exchange Commission roundtable discussion on market structure scheduled for Wednesday, June 2 in Washington, D.C., TABB Group today issued results of an “Industry Barometer” survey conducted the week of May 13 to gauge current opinion on market structure and how to improve it in the aftermath of the May 6 market crash.

According to Adam Sussman, TABB’s director of research, barely half of the 145 participants have at least a high degree of confidence in US equity market structure.  “Within that group,” he says, “the asset management community has the least confidence as only 44% of the buy-side has a very high or high level of confidence in the US Equity Market Structure.  At TABB, we believe this is particularly demoralizing, given that the buy side are guardians over much of the equity investments in the US.”

The survey, “May 6th and Market Structure Reform: Industry Barometer,” covers participants’ views from buy side (32%) and sell side (30%) firms, execution venues (27%), liquidity providers (6%) and advisory firms, consultants, technology providers (5%).  Subjects examined include high frequency trading (HFT), co-location, trade-at rule, depth of book trade-through, stub quotes, circuit breakers, trade cancellation and large trader reporting rule.

Key results include:

Market Structure:

  • 73% do not believe market structure strongly supports an orderly market.
  • 44% believe that market structure is not a level playing field, up from 34% in a 2009 survey.

May 6th Crash:

  • 62% of the buy-side participants are now negative toward HFT; the sell side and execution venues remain positive in their views on HFT.
  • HFT, execution algorithms and Reg NMS Route Out were contributing, not primary, factors on May 6 across all segments.

Market Fixes:

  • There is consensus that high frequency traders should register as broker dealers.
  • 50% of the buy side strongly supports HFT quoting obligations.
  • Nearly a third of the buy side community is in favor of banning co-location
  • The trade-at rule is viewed as an incentive to attract more limit orders to lit markets.
  • Depth of book trade-through garnered support from the buy side and execution venues, not the sell side.
  • Most participants have a positive or neutral view (83%) on the elimination of stub quotes and the large trader reporting rule

In a comment letter submitted to the SEC, dated May 26 (RE: File No. 4-602, Release No. 34-62115), Sussman wrote:  “During the weeks immediately following May 6, 2010, TABB Group created a series of questions designed to help the industry gauge the current opinion on market structure and what should be done to improve its resilience to unexpected behavior. TABB Group invited a wide range of institutional equity market participants, including individuals from investment management companies, hedge funds, brokers, exchanges, alternative trading systems, liquidity providers and other industry experts. This list was culled from our own proprietary list of clients and research participants. We received 145 responses to the questions.”  The SEC comment letter and survey results can be read at

The Industry Barometer is also available through TabbFORUM,, the online community that engages over 2,500 capital markets professionals from buy-side and sell-side firms, exchanges, regulatory agencies, technology vendors and media, focusing on current issues affecting the financial markets.

About TABB Group

TABB Group is the financial markets industry’s only research and strategic advisory firm focused exclusively on capital markets, with offices in New York and London.  Founded in 2003 and based on the proven interview-based research methodology of “first-person knowledge” developed by founder Larry Tabb, TABB Group analyzes and quantifies the investing value chain from the fiduciary, investment manager and broker, to exchange and custodian, helping senior business leaders gain a truer understanding of financial markets issues.  In January 2010, TABB Group launched TabbFORUM,, the by-invitation, online community where capital markets professionals share and contribute commentary on current industry-wide issues.  For more information, visit

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