Fall 2022 - Blue Sky Talks
November 9, 2022 (Wed)
12:10 PM EST
Lawrence Harris
Fred V. Keenan Chair in Finance
Professor of Finance & Business Economics
USC Marshall School of Business
Chief Economist
U.S. Securities and Exchange Commission (2002 - 04)
Talk Location - Jerome Greene Hall, Room 546
The Quarter-Penny Tick
Stock exchange fee pricing schemes—maker-taker, inverted taker-maker, and flat pricing—have created convoluted markets in which an effective quarter-penny tick is primarily available only to sophisticated traders who switch between maker-taker, inverted, and flat markets as market conditions change. The system creates an agency problem between brokers and their clients, resulting in poor routing decisions as brokers try to maximize maker rebates. The quarter-penny tick also reduces the cost of certain parasitic trading strategies to the detriment of investors. This study identifies how sophisticated traders exploit the system and provides an empirical characterization of the problem.
Speaker Bio
Larry Harris holds the Fred V. Keenan Chair in Finance at the USC Marshall School of Business. His research, teaching, and consulting address regulatory and practitioner issues in trading, in investment management, and real estate. He has written extensively about trading rules, transaction costs, and market regulations. Many practitioners regard his introduction to the economics of trading, Trading and Exchanges: Market Microstructure for Practitioners (Oxford University Press: 2003), as a “must read” for entrants into the securities industry.
Dr. Harris served as Chief Economist of the U.S. Securities and Exchange Commission in 2002- 04. He currently serves as lead independent director of Interactive Brokers (IBKR); director, the Selected Funds; research coordinator, the Institute for Quantitative Research in Finance (the Q-Group); executive director of the Financial Economists Roundtable; member, SEC Fixed Income Market Structure Advisory Committee; member, CATS NMS, LLC Advisory Committee; and co-director, USC-CFALA CFA Review Program.
He is a former director of CFALA, the Los Angeles Society of Financial Analysts, and a former associate editor of the Journal of Finance, the Review of Financial Studies, and the Journal of Financial and Quantitative Analysis. Other professional service has included year-long assignments to the U.S. Securities and Exchange Commission and to the New York Stock Exchange. Dr. Harris also worked at UNX, Inc., an electronic equity broker, and Madison Tyler, LLC, a dealer engaged in proprietary electronic trading. Professor Harris received his Ph.D. in Economics from the University of Chicago in 1982 and is a designated CFA charter holder.