Equity markets have exploded in recent years, not just in share and order volumes but also in the number of trading venues. That’s a mixed blessing for the institutional investors that have supported the formation of dozens of alternative sites now challenging the dominance of traditional, established exchanges: The competition puts downward pressure on the costs of executing big institutional trades but has vastly complicated the process of deciding where to go for the fastest and cheapest transaction.
For the better part of a decade, technology has solved that “best execution” puzzle — and with ever-increasing effectiveness. Sophisticated algorithms now require mere microseconds to size up conditions and identify market centers ripe for a trade. Then they set a series of transactions in motion through high-speed order-routing and execution management systems to exchanges and other trading platforms the world over; these in turn continually upgrade their...
