[ by Howard Haykin ] Now We Learn: Equities Professionals Continue to Lose Faith in Market Structure. According to Traders Magazine Reporter John D'Antona Jr., "things have gone from bad to worse" among our industry's equity traders.  An August survey, conducted by industry consultants, The Tabb Group, finds that about a third of the 260 respondents - or some 90 persons - have a weak or very weak view of equity market structure. Only 31% held that view in June.  Interestingly, the June survey was conducted shortly after the May 18th troubled Facebook IPO on Nasdaq. We understand that broker-dealers, asset managers, hedge funds, execution venues and vendors participated in both surveys. Reading into the Numbers. Mr. D'Antona reports that trading pros have dramatically changed their perception of the industry, in just over the last few years.  After the Flash Crash of May 2010,  only 15% of respondents viewed the market structure as weak or very weak, while 2% held a very high confidence level. Adam Sussman, partner and director of research at Tabb and author of the survey, noted the 2-year skid in faith and reported that survey respondents felt the best way to halt the skid would be to reduce fragmentation within the market.  That answer drew elicited the an interesting response from Mr. Sussman, who told Traders Magazine that even if certain market fixes or perceived fixes - e.g., implementation of new proposals like 'Trade-At," minimum price improvement requirement for dark pools, or other rules were put into place - fragmentation would remain a problem. Those providing feedback the survey results often interpreted "reducing fragmentation" to mean more exchange-friendly proposals and rules.  Dark pools and other venues were viewed as scapegoats.  And, the idea of curbing fragmentation elicited a venue operating official to tweet that denying new exchange licenses or curtailing dark pool trading was OK with him - i.e., so long as it wasn't his firm. Yet, Sussman wasn't sure how much of an effect there would be if fragmentation were to be addressed through new rules or other fixes.  Would it be enough to assuage market professionals, let alone institutional or retail investors? - D.K. That point was echoed by the broker-dealers and execution venues, who said the weak market confidence numbers result from weak stock market returns, and not market structure issues or reforms.

"Market structure is a necessary but insufficient lever to regaining investor confidence. We could have perfect market structure right now but equities are still underperforming and that doesn't change the fact that flows continue to move out of the sector." -- Sussman

Investor Fallout. The ICi (Investment Company Institute), which represent the mutual fund industry, reports that investors pulled $16 billion from domestic equity mutual funds during the 3rd quarter, while putting in a little more than $12 billion into bonds. A last comment on fragmentation or market structure from Sussman noted that the problem might be one of people not being able to see the forest through the trees.  Indeed, fixing market structure isn't about bringing average mom-and-pop investors back to equities.  "If the professional trading community is running scared, what is the public thinking?" Sussman expects investors to pour new cash into equities later this year. For further details, go to:   [Traders Magazine, 8/24/12].