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

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