A publication in the prestigious Journal of Banking and Finance demonstrates that market fairness does not have to come at the expense of market efficiency, using empirical data from the Tokyo Stock Exchange and an innovative methodology developed by our experts over decades of research grounded in industry. This approach is gradually being recognised as the new standard and deployed in order to operationalise fair and efficient markets for all : ‘While scholars have extensively studied the effects of market design on market quality from the perspective of market efficiency, they have neglected market fairness.’ This article adds another example of the tools available to grasp and act on issues of market fairness.
In brief, the authors explain that ‘In 2015 the Tokyo Stock Exchange (TSE) implemented Arrowhead Renewal improvements (ARI) that reduced latency from about one millisecond to less than 0.5 ms. Simultaneously, the ARI introduced new risk management functions to improve market fairness by reducing manipulative trading strategies. We find a dramatic improvement in market fairness as proxied by marking-the-close incidents, which declined by 61.19%. …(as well as in efficiency with) a reduction in the effective (quoted) spread of 6.45% (5.79%).’
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