Top of Mind

Remaking markets?

Major financial markets have become increasingly automated over recent decades, leading to an arms race focused on shaving nanoseconds off trade executions. Now there are also signs of a pushback.

The newly-approved IEX stock exchange aims to encourage long-term liquidity in public markets by discouraging high-frequency trading strategies, in part, with a 350 millionth of a second “speed bump.”  

Another proposed exchange goes further. LTSE would only list companies that accept specified compensation and information-sharing standards aimed at encouraging long-term thinking.

Meanwhile traders that specialize in block trades—buying or selling big chunks of stock—are in demand because they appear to outperform computer programs.

Quantitative investing pioneer Robert Litterman highlighted the importance of judgment in shaping any strategy in a conversation with Yale Insights in 2014.