In early 2021, the usually relatively obscure topic of US equities market structure hit mainstream news headlines. In March, an investing subreddit called r/wallstreetbets triggered a short squeeze in brick-and-mortar video games retailer GameStop’s stock, making it the most highly traded asset in the US. The ensuing “meme stock” frenzy was framed as nothing less than all-out class war, and saw possible conflicts of interest in the practice of payment for order flow wind up on the agenda of the Democrat-led Securities and Exchange Commission.
But US market structure underwent far more profound changes this year—ones that did not make many headlines in the national press, but were nonetheless extremely controversial. In 2021, the commission finalized drastic changes, first proposed in early 2020, to how the US consolidated tapes of market data from equities exchanges will be operated and governed, in a bid to keep pace with the technology used by direct exchange feeds to ensure those using the tapes are not at a competitive disadvantage.
In parallel, the large exchanges, sensing existential threats to their business models, have turned to the courts to put a halt to the SEC’s efforts.
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