Press Release

New Study Shows Modern Trading Technology Allows Workers to Retire Two Years Sooner

Issued by Modern Markets Initiative

July 19, 2022

Market automation has resulted in 30% more lifetime savings for investors

Even in volatile times, investors are able to rebalance and reallocate capital as needed in the market

WASHINGTON -- A new report issued today by the Modern Markets Initiative, a non-profit education and advocacy organization for innovation in today’s markets, found that middle class workers can retire two years earlier due to the difference in retirement savings brought upon by market automation.

The study, “A Report on Market Automation and Dependable Liquidity in Times of Uncertainty: Investor Savings from Narrowed Bid Ask Spreads, Markets Functioning as Intended” analyzes multiple savings vehicles utilized by American investors, including public pension plans, 401 (k) plans, Individual Retirement Accounts (IRAs), 529 college savings plans and ETFs to provide data showing the benefits of market automation in saving investors’ money with lower trading costs and narrower bid-ask spreads.

The report found that automated trading technology has ensured investors have 30% more in lifetime savings, as compared to a pre-electronic trading era before market automation.

Data from the report also shows:

• California 529 plans save an average of $61 million a year – or tuition for 6,100 students – as a result of today’s efficient modern markets
• The Public Pension Fund Retirement Plan saves over 9.5 million working hours a year, or $125 million in cost savings from narrowed bid-ask spreads

“At present, about half of all Americans are invested in the stock market, either directly or indirectly, and the data in this report proves that it has never been a better time to be a retail investor as far as low-cost trading and liquidity,” said Kirsten Wegner, CEO of the Modern Markets Initiative.

Technological innovation in the capital markets, including market automation paired together with regulatory reform reducing minimum tick sizes, has driven down the cost of trading substantially over the past three decades, the report states.

Since the 1990s, electronification initiatives including automated trading technology, improved exchange technology, decimalization, Reg NMS (protecting linked markets), among other technological and regulatory developments, have made the overall trading ecosystem of the U.S. capital markets more accessible and have resulted in a 50% decrease in the cost of trading for retail investors.

The report comes at a time of ongoing geopolitical, inflation, supply chain, and COVID-related uncertainty. Given this backdrop, it is notable that despite the fluctuations, the equities markets are functioning as intended with investors able to get in or out of their positions efficiently and rebalance and reallocate capital as needed.

“It is imperative that investors have confidence in the safety and soundness of the markets, and that the mechanics of the markets operate efficiently to deliver dependable liquidity and maximized cost savings,” the report states.

To continue this trend, it is important that regulatory policies are data-driven and consider the interests of the wide cross section of industry participants and that regulators have the resources to continue to be effective cops on the beat at the SEC, FINRA and CFTC to ensure that any market manipulation such as front-running, spoofing, or other bad acts, are detected and deterred.

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