In the last 20 years, the U.S. equity markets structure has been changing drastically. The Securities and Exchange Commission (SEC), driven by numerous studies regarding market competition and economic efficiency, recognizing these two variables as having a positive correlation (Casu & Girardone, 2009; Porter, 1990), started to implement policies against market dominance. On August 29th, 2005, the Regulation National Markets System (Reg NMS) was released to harmonize regulation for equity trading services within the U.S., increasing competition and consumer protection in the trading industry services.
Using panel data regarding order execution from September 2016 to December 2016. This research attempted to evaluate the effectiveness of Reg NMS regarding trading venues competition using a multinomial logit demand model for differentiated products with dummy variables to capture a non-observable variable. The results suggest that, even though, implicit trading costs, are essential to estimate the trading demand still exists market dominance in the U.S. trading venues, resulting in unusually inelastic price elasticities
