Making stock exchanges faster can actually lead to bigger price gaps and higher costs for regular investors.
March 19, 2026
Original Paper
Exchange Speed, Liquidity, and Quoters’ Competition
SSRN · 6438025
The Takeaway
While we think faster technology always makes markets more efficient, extreme speed can actually discourage competition. When technology becomes too fast, the quickest traders stop fighting for the best prices, allowing them to collect higher 'rents' at the expense of regular investors.
From the abstract
This paper examines an exchange speed upgrade and studies the role of exchange speed in trading, documenting heterogeneous effects across market capitalisation groups and highlighting changes in competition among liquidity providers. For the largest and most liquid stocks, quoted and effective spreads remain unchanged after the event. However, the absence of changes in these aggregate measures mask offsetting effects, including higher revenues for some liquidity providers and lower short-term mi