Paying for Efficient and Effective Markets


March 22nd 2019 to March 23rd 2019
Time: All day  Venue: Stationers' Hall, Ave Maria Lane, London EC4M 7DD United Kingdom
OrganisersJon Danielsson (SRC, LSE), Kevin James (FCA, SRC), Dimitri Vayanos (FMG, PWC, LSE)

Speakers: Matteo Aquilina (FCA), Rudi Fahlenbrach (Swiss Institute of Finance), Jill Fisch (U Penn), Mireia Giné (IESE), Kevin James (FCA, SRC), Robert MacKay (Warwick), Daniel Mittendorf (FCA), John Morley (Yale), Emilio Osambela (FRB), Lasse Pedersen (Copenhagen), Edwin Schooling Latter (FCA), Amarjeet Singh (SEBI), Robert Stambaugh (Wharton), Grant Turner (BIS), Dimitri Vayanos (FMG, PWC, LSE)


To perform at full potential, the economy requires efficient and effective financial markets that operate at minimum feasible social cost.

Actively managed funds play a crucial role in bringing about market efficiency and effectiveness, but only as a by-product of their costly efforts to out-perform the market. Passive investment funds compete for investors by offering low-cost investment options, but they do so in part by taking market efficiency and effectiveness as given. Consequently, it is unclear if market forces alone will lead to the optimal balance of efficiency, effectiveness, and cost.

In this two-day conference we will explore these issues, focusing upon:

  • The rise of passive investing
  • How market efficiency arises: The role of  active funds, passive funds and benchmarking
  • Do large investment funds affect competition between the firms in which they invest?
  • Manager skill and fund fees in equilibrium
  • The impact of passive funds on corporate governance
  • The implications of passive funds for financial stability

Materials available for download

The Rise of Passive Investing
  • The Implications of Passive Investing for Securities Markets: Vladyslav Sushko (BIS) and Grant Turner (BIS) - slides
  • The Asset Management Industry in India – An Overview: Amarjeet Singh (SEBI) - slides
  • The Evolution of the Active/Passive Split and the Cost of Price Discovery in the UK: Daniel Mittendorf (FCA) - slides
Market Efficiency: A Peek Behind the Curtain
  • Who Trades?: Kevin James (FCA, SRC), Andrea Pirrone (FCA, SRC) and Claudia Robles-Garcia (FCA, LSE) - slides
Asset Management and Market Efficiency
  • Active and Passive Investing: Nicolae Garleanu (UC Berkeley) and Lasse Pedersen (Copenhagen) - slides
  • Asset Management Contracts and Equilibrium Prices: Andrea Buffa (Boston U), Dimitri Vayanos (LSE), and Paul Woolley (LSE) - slides
Common Share Ownership and Market Competition
  • Common Ownership, Competition, and Top Management Incentives: Miguel Anton (IESE), Florian Ederer (Yale), Mireia Giné (IESE), and Martin Schmalz (Michigan) - slides
Keynote Speech
  • Skill and Fees in Active Management: Robert Stambaugh (Wharton) - paper

Passive Investing and Corporate Governance

  • Passive Investors: Jill Fisch (U Penn), Assaf Hamdani (Tel Aviv), and Steven Solomon (Berkeley) - slides
  • Do Exogenous Changes in Passive Institutional Ownership Affect Corporate Governance and Firm Value: Cornelius Schmidt (Norwegian School of Economics) and Rudi Fahlenbrach (EPFL and Swiss Finance Institute) - slides
  • Too Big To Be An Activist: John Morley (Yale) - slides
Stewardship: A Regulatory Perspective
  • Promoting Effective Stewardship: Edwin Schooling Latter (FCA) - speech
Improving Market Efficiency By Improving Market Design
  • Quantifying the High-Frequency ‘Arms Race’: A Simple New Methodology and Estimates: Matteo Aquilina (FCA), Eric Budish (Chicago), and Peter O’Neill (FCA)

Asset Management and Financial Stability

  • The Shift From Active to Passive Investing: Potential Risks to Financial Stability?: Kenechukwu Anadu (FRBB), Mathias Kruttli (FRB), Patrick McCabe (FRB), Emilio Osambela (FRB), and Chaehee Shin (FRB) - slides
  • Dynamics of Value-Tracking In Financial Markets: Nicholas Beale (Sciteb), Richard Gunton (Sciteb), Kutlwano Bashe (Warwick), Heather Battey (Imperial), Robert MacKay (Warwick)
The conference was co-hosted with the Financial Conduct Authority, Securities and Exchange Board of India, Financial Markets Group and the Paul Woolley Centre for the Study of Capital Market Dysfunctionality.