Quant Opinion: Liquidity Centers Are the First Step Toward Industry Utilities
Liquidity centers will eventually become liquidity and utility centers for the equities markets.
Perhaps the term “liquidity center” is hype, Orwellian double-speak masking the fact that liquidity is no longer centered anywhere. Perhaps it is just clever marketing — a way to make data center sales sexier. Or perhaps it represents the opportunity to create the next-generation financial center.
There are parallels between what occurred in U.S. equity markets over the past decade and the opposing fates of city and suburban populations. Cities suffered net losses, in part because newly built infrastructure and transportation enabled worker mobility. In equities trading, cheap bandwidth, storage and computational power — coupled with well-documented regulatory mandates — allowed liquidity to shift to an increasing number of disparate execution venues. In the short-term, everything seemed swell: Kids had bigger backyards and spreads tightened.
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