Ecological and Coevolutionary Dynamics in Modern Markets Yield Nonstationarity in Market Efficiencies

Figure 1

The U.S. national market system (NMS) is a complex, multilayered system exhibiting dynamic behaviors that vary based on network topology, active trading strategies, the regulatory environment, and more. The top panel shows several time series generated by the system, namely, the returns and volatility for the trading symbol PRU, along with an indicator for information asymmetry intensity. The second panel investigates higher-level system dynamics, displaying some of the network topologies that the NMS has assumed over the course of our study period (Q3 2009 – Q2 2017). The third panel shows a more detailed view of the NMS as it stood in September 2016, following IEX’s transition from an alternative trading system to a national securities exchange. The final panel summarizes the activity profiles for all exchanges that functioned during our study period. Shaded dates indicate that an exchange was active, while unshaded dates indicate abnormal or unexpected inactivity. Expected outages, such as weekends and holidays, are not shown.