90. What value would each of the market quality metrics described above provide to market participants receiving them? If possible, please be specific about how each market quality measure could be used to enhance reliability and risk management of ATSs.
91. Conversely, could any of the market quality metrics described above be used by market participants to manipulate the order book, /112/ to identify competitors' trading strategies, or to engage in other trading activities that do not contribute to effective risk management and efficient discovery the traded asset's economic value? If so, please provide specific information regarding how such information could be misused. If possible, please provide recommendations regarding steps the Commission could take to prevent misuse.
FOOTNOTE 112 Meaning, behaviors that, while not strictly illegal, are used to advantage one's own orders in ways that do not contribute to efficient price discovery. END FOOTNOTE
92. Are there additional market quality metrics that the Commission should contemplate requiring exchanges to provide? If so, what value would they provide and how would they be used?
93. If the Commission determines that measures should be calculated in the same way by various exchanges in order to provide comparable measures of market quality, then how, specifically, should each of the above mentioned metrics be calculated in order to ensure that they are most valuable to market participants?
94. What timing and mode of dissemination is appropriate for each metric? For example, should measures be provided as daily averages?
95. Does the liquidity of a given market impact which market quality metrics would be reliable and useful when calculated for that market? If so, which metrics are inapplicable in less liquid markets, and why? What liquidity measures and thresholds are relevant to determining which metrics should apply to a given market?
3. Market Quality Incentives
The impact of ATSs, and particularly those implementing HFT strategies, is a topic of ongoing interest among researchers, market participants and others. Several studies have found that increases in automated trading are associated with improved market quality. /113/ Some researchers and market participants, however, have also noted that the presence of HFT has the potential to shape the types of liquidity providers available in a market, /114/ may discourage ATSs from submitting resting orders that remain in the order book long enough for humans to react, and may also be associated with undesirable trading practices that are more easily implemented by automated systems. /115/ Various recommendations have been advanced to promote the benefits of HFT while simultaneously disincentivizing trading strategies that do not contribute to efficient price discovery. /116/
FOOTNOTE 113 See Jonathan Brogaard,
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