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The Answer Is Transaction Costs « »
The Innovation is the Exchange Itself!

29d ago 1:08:39

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Chris Cornette, a longtime securities trader who grew up in the business, reveals how the most important innovation that made US capital markets preeminent in the world was the exchange itself.
• Cornette's father worked in the P&S (Purchase and Sales) department on Wall Street, eventually becoming the controller of an American Stock Exchange specialist unit
• The original Buttonwood Agreement from 1792 created exclusivity among traders that helped establish trust in the market
• Exchange specialists subsidized trading in small-cap stocks using profits they made from large-cap stocks
• The phrase "your word is your bond" wasn't just a saying but the foundation of the trading system. Exclusion from the exchange was enough of a threat to discipline bad actors
• Specialists would ensure market liquidity and "continuity" in pricing, preventing wild price swings
• The transition to electronic trading and decimal pricing in the late 1990s fundamentally changed market dynamics
• High-frequency trading firms don't have the same ethical obligations that floor traders did
• The number of publicly traded companies has declined significantly since the move to screen-based trading
• Self-regulation through the exchange helped create trust that made markets function effectively. Not perfectly, but effectively.

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz

Chapters

1. Introduction to Chris Cornetti (00:00:00)

2. The Exchange Constitution and Origins (00:09:11)

3. How Trading Actually Works on the Floor (00:17:57)

4. Ethics and Trust in Exchange Markets (00:31:54)

5. The Shift to Electronic Trading (00:42:36)

6. High Frequency Trading Problems (00:53:56)

7. Closing Thoughts and Twedges (01:05:35)

65 episodes

#Science #Social Sciences #Michael Munger #Politics #News #Comedy

The Innovation is the Exchange Itself!

The Answer Is Transaction Costs

26 subscribers

published 29d ago

MP3•Episode home

Send us a text

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

You can follow Mike Munger on Twitter at @mungowitz

Chapters

1. Introduction to Chris Cornetti (00:00:00)

2. The Exchange Constitution and Origins (00:09:11)

3. How Trading Actually Works on the Floor (00:17:57)

4. Ethics and Trust in Exchange Markets (00:31:54)

5. The Shift to Electronic Trading (00:42:36)

6. High Frequency Trading Problems (00:53:56)

7. Closing Thoughts and Twedges (01:05:35)

65 episodes

#Science #Social Sciences #Michael Munger #Politics #News #Comedy

All episodes

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The Answer Is Transaction Costs « » The Innovation is the Exchange Itself!

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

Chapters

1. Introduction to Chris Cornetti (00:00:00)

2. The Exchange Constitution and Origins (00:09:11)

3. How Trading Actually Works on the Floor (00:17:57)

4. Ethics and Trust in Exchange Markets (00:31:54)

5. The Shift to Electronic Trading (00:42:36)

6. High Frequency Trading Problems (00:53:56)

7. Closing Thoughts and Twedges (01:05:35)

The Innovation is the Exchange Itself!

If you have questions or comments, or want to suggest a future topic, email the show at [email protected] !

Chapters

1. Introduction to Chris Cornetti (00:00:00)

2. The Exchange Constitution and Origins (00:09:11)

3. How Trading Actually Works on the Floor (00:17:57)

4. Ethics and Trust in Exchange Markets (00:31:54)

5. The Shift to Electronic Trading (00:42:36)

6. High Frequency Trading Problems (00:53:56)

7. Closing Thoughts and Twedges (01:05:35)

Podcasts Worth a Listen

Welcome to Player FM!

Similar to The Answer Is Transaction Costs

The Answer Is Transaction Costs « »
The Innovation is the Exchange Itself!