Market microstructure is such a massively complicated topic that few insiders, much less the SEC, thoroughly understand it.
It's actually not super complicated. A limit order book is a straightforward thing. If you can do FizzBuzz, you can probably whip up a toy implementation of a matching engine in an afternoon. People think it's complicated because of all the FUD (c.f. the comments on this story), but the basic mechanics of how a modern exchange operates are remarkably simple.
>People think it's complicated because of all the FUD (c.f. the comments on this story), but the basic mechanics of how a modern exchange operates are remarkably simple.
I'm referring to market microstructure in terms of the complex interactions amongst exchanges, the impact of Reg NMS, etc. Obviously the underlying algorithms can be boiled down to simple components.
For those interested in learning something about market microstructure, I highly recommend "Trading and Exchanges: Market Microstructure for Practitioners" as an introduction to the basics:
> I'm referring to market microstructure in terms of the complex interactions amongst exchanges, the impact of Reg NMS, etc.
I've heard that the financial interconnections are remarkably similar to ecologies. Would be interesting to get some more of that tooling for analyzing ecologies like fisheries available to financial regulators.
What you defined is not market microstructure, but the platonic ideal of a matching engine. The microstructure of a market is defined (by a Wikipedia source) as: "the study of the process and outcomes of exchanging assets under a specific set of rules. While much of economics abstracts from the mechanics of trading, microstructure theory focuses on how specific trading mechanisms affect the price formation process.”[0]
That is fantastically complicated. As you say, anyone can write a matching engine.
And anyone can code up the Game of Life in a couple hours. But to understand the "physics" behind emergent phenomenæ such as gliders? Much much more difficult.
Even some people who profess to be computer programmers can't do fizzbuzz. How do you expect the general population, even those with skill in MS Excel, to be able to?
It's actually not super complicated. A limit order book is a straightforward thing. If you can do FizzBuzz, you can probably whip up a toy implementation of a matching engine in an afternoon. People think it's complicated because of all the FUD (c.f. the comments on this story), but the basic mechanics of how a modern exchange operates are remarkably simple.