As trading has grown and globalization of the capital markets has occurred over the years, institutionalization of securities markets transpired. The effects of the institutionalization of securities markets are as follows:

1. Commissions
Commissions are defined as the explicit fee to trade a security. Given the institutionalization of securities markets, commissions were structured by the SEC and work to limit unfair practices with respect to how firms charge commissions for trading.

2. Block Trades
Block trades are large trades that are primarily done through institutions. Given the growth of the financial markets, block trades have increased in frequency. As a result, block trading houses were developed to handle these trades in an organized and efficient manner so as not to disrupt the securities market and cause large-scale volatility.

3. National Market System
The National Market System (NMS) has been proposed; it would provide even greater efficiency with lower transaction costs. In proposals, the NMS would contain a centralized reporting system, a centralized quotation system, centralized limit order book and increased competition among all market makers.

4. Stock Price Volatility Impact
One theory of the institutionalization of securities markets is that volatility is increased given the increased institutional trading, typically done in block trades. The counter-argument to the theory is that institutional trading will decrease volatility because it will make the markets more liquid. As such, there is no empirical evidence that the institutionalization of securities markets has impacted stock price volatility.



Characteristics of Security Indexes

Related Articles
  1. Investing

    Understanding Block Trades

    A block trade is the sale or purchase of a large quantity of securities.
  2. Investing

    Wall Street Finding Profits in Block Trades as IPO Market Stalls

    Banks are buying "blocks" of listed shares and trying to flip them for a profit.
  3. Investing

    H&R Block Stock Trades Ex-Dividend Thursday (HRB)

    H&R Block will send its dividend payment on July 1 to shareholders of record as of June 20.
  4. Small Business

    European Phone Carrier Three Blocks Ads

    Three, a mobile carrier in the UK, has implemented mobile ad blocking. Will it affect Google's revenues?
  5. Trading

    What is the Difference Between Institutional Traders and Retail Traders?

    The differences between retail and institutional traders lie in the size of the trade, level of sophistication, and the speed of transactions.
  6. Investing

    H&R Block Declares a Rare Dividend Raise

    On the back of a fourth quarter that slightly topped analyst expectations, H&R Block (NYSE: HRB) did something it hasn't done in half a decade -- it raised its quarterly dividend. Going forward, ...
  7. Investing

    Volatile Stocks: Great, If You Have The Stomach

    Volatile stocks can be a lucrative opportunity for short-term traders. For buy-and-hold investors, it's a much different story.
  8. Tech

    What is Bitcoin Mining?

    How does Bitcoin get released into circulation?
  9. Investing

    What’s The Difference Between Institutional and Non-Institutional Investors?

    Institutional investors are the big guys on the block. Non-institutional investors are everyone else.
Frequently Asked Questions
  1. Why is social responsibility important to a business?

    Take social responsibility seriously, and your business could benefit from happier, more productive staff members while helping ...
  2. Which socially responsible retailers appeal most to ethical investors?

    Learn why ethical investors have many options in the retail sector, and discover which retail companies are most popular ...
  3. What are Some Examples of Free Market Economies?

    Learn which of the world's economies best resemble free market economies, marked by free trade, low government involvement, ...
  4. Who Decides When to Print money in India?

    Find out the role of the Reserve Bank of India, or RBI, and the amount of authority given to the government. Learn who is ...
Trading Center