02.21.2024

Plato Releases Research on Market Dynamics and Speed Bumps

02.21.2024
SIP Speeding Up

Plato Partnership has published new independent academic research on the impact of speed bumps for market quality. The study, titled “Are Speed Bumps Beneficial?” delves into the theoretical and empirical literature surrounding speed bumps and their implications for market dynamics.

The study has been conducted by Fatemeh Aramian, Postdoctoral Researcher at the University of Melbourne, and Carole Comerton-Forde, Professor of Finance at the University of Melbourne.

Mike Bellaro

The Research Includes:
  • In-Depth Analysis: The research paper provides a thorough review of speed bumps – deliberate delays in processing order messages on an exchange – and their influence on market quality.
  • Policy Recommendations: Based on existing academic evidence, the paper offers essential policy recommendations, emphasizing the need for cautious evaluation and regulatory oversight of speed bump proposals.
  • Alternative Approaches: The study identifies alternative strategies to address latency arbitrage, such as liquidity protection programs and micro-burst fees, highlighting their potential benefits in preserving market integrity.
  • Regulatory Considerations: It underscores the importance of evidence-based policymaking and collaboration among regulators and market participants to mitigate the adverse effects of latency arbitrage while maintaining market quality.

This research provides valuable insights into the intricate relationship between speed bumps and market quality, shedding light on the complexities of modern market structure. By examining the empirical and theoretical evidence and offering thoughtful policy recommendations, this study serves as a vital resource for regulators, market participants, and policymakers navigating the evolving landscape of capital markets.

Learn more

Source: Plato

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