When the market's plumbers become too few to fail

A new paper argues that Citadel and Virtu's grip on trading is not the crisis it looks like — yet the fixes it proposes are shakier than the diagnosis

A new working paper by Jonathan Brogaard, of the University of Utah, and Yesha Yadav, of Vanderbilt Law School, takes on an uncomfortable fact about modern stock markets: two firms, Citadel Securities and Virtu Financial, together execute roughly 70% of retail equity orders in America. Citadel alone intermediates around a quarter of all American share trades, handling some $450bn in daily volume -- more than passes through the New York Stock Exchange itself. Jane Street, Susquehanna International Group, DRW and a handful of others round out a cohort that has displaced the investment banks as the market’s primary suppliers of liquidity. The paper’s contribution is to resist the obvious framing, that this concentration makes such firms “too-big-to-fail”, and to argue instead that the more precise danger is closer to the opposite: they have become too few to fail.