Schwab Whitepaper: U.S. Equity Market Structure - Order Routing Practices, Considerations, and Opportunities

September 7, 2022

Since our inception, Schwab has looked to improve the retail investor’s experience and remove barriers to investing.  It is why, for nearly 50 years, we have looked for ways to change the system to benefit individual investors and those who serve them, including increasing transparency, eliminating commissions, reducing fees and removing minimums. 

Today’s transparent, competitive U.S. equity markets are the deepest, most liquid, and most efficient in the world, which allows investors to enjoy narrow spreads, low transaction costs, and fast execution speeds. These market characteristics are championed by the SEC and its longstanding goal of enhancing and protecting the retail investor experience. While there remain opportunities to improve this market even further, we are concerned that some calls for reform are obscuring the benefits of the current ecosystem to retail investors, which include vastly expanded product offerings, world-class trading platforms that rival those used by investment professionals, no/low-cost trading, and superior execution quality.

As regulators and legislators consider potential actions to take with respect to U.S. equity market structure, Schwab will continue to advocate for retail investors. The current market structure delivers great outcomes for investors, and indeed has never been better - but there are still areas for improvement, and we are supportive of several specific changes, including increasing transparency and setting guardrails around certain market practices. Any contemplated actions, however, must be data-driven in assessing the benefits of the current equity market ecosystem to retail investors, and consider the potential risks or unintended consequences from changes to this market structure.

Schwab remains committed to enhancing and protecting the retail investor experience, and to that end, we have summarized our perspectives on the current market structure and how potential changes may help or hinder our shared objective of protecting these investors and their investing experiences.

The following white paper, “U.S. Equity Market Structure: Order Routing Practices, Considerations, and Opportunities,” provides a comprehensive and fact-based summary of equity market structure, order routing practices, client execution quality, and Schwab’s perspectives on potential changes to the status quo.