Last year was a busy year for the markets. It included macro events like tariffs, artificial intelligence (AI) and the growing dominance of U.S. tech companies attracting ever more global retail investors. That, in turn, led to ongoing growth of off-exchange trading and plans for 24-hour trading — both of which make a better National Best Bid and Offer (NBBO) even more important.
Today we look at my 10 favorite charts from 2025.
1. Stock markets are good for the economy
You might think it is obvious that stock markets are good for the public. Accounting statements make it easier for more investors to efficiently value companies and allocate capital, and that capital allows companies to expand, build new factories or products, and hire more workers. Investors also own a share of the returns each company earns.
But last year we found a number of new data points that support that intuition.
- One chart from this blog shows that countries with high levels of direct ownership in stocks – like the U.S., Sweden and Australia – also tend to have higher valuations. That’s good for companies as it reduces their costs of capital, making more investments even more likely.
- This ties with a WFE paper that we also referenced, that found countries that can grow their equity markets result in stronger GDP growth.
- In that same blog, we also showed that stocks do increase investor wealth more than most other assets over the very long run, making them an important element of wealth creation.
What we see is that the whole ecosystem is important — public access to companies, public interest in companies, transparent prices and accounting data to make valuations easier, and companies interested in going public. Altogether, stock markets make economies and household finances stronger.
Chart 1: Countries with more equity ownership have higher stock valuations
2. Markets help companies finance in many different ways
Speaking of companies raising capital and distributing returns back to their investors…
We showed SIFMA data highlighting that, as exciting as initial public offering (IPO) day is for a company and investors, IPO proceeds raised are a fraction of all capital raised by the U.S. stock market each year. For example, in 2024:
- IPOs raised a total of $30 billion.
- Secondaries raised almost $170 billion.
Chart 2: Companies tap stock markets for hundreds-of-billions of dollars of finance each year
The same blog showed that companies return even more back to investors through two main ways:
- Buybacks: According to the Wall Street Journal, companies spend around $1 trillion each year on buybacks. That’s significantly more than the value of primary and secondary finance raised combined. Interestingly, the data also shows buyback finance is concentrated, with the top 11 companies accounting for almost half, or $500 billion, of announced buybacks – and buyback values rise and fall with the strength of earnings and the economy.
- Dividends: Add to around $1 trillion each year, although the data also shows dividends are much more consistent over time.
3. Stocks don’t adjust 100% for the value of a dividend
While we’re talking about dividends…
You might expect the value of a company to decline by exactly the amount of a dividend — after all, the company’s balance sheet is reduced by exactly that much when the cash is paid to investors.
In our analysis, we found that stock prices do adjust immediately after a dividend hits “ex-date” (Chart 3).
However, the median stock decline was only around 90% of its dividend amount. The most likely outcome is a drop even less than that.
Interestingly, a reasonable percentage (about 20%) of stocks see prices increase on ex-dividend date — even after accounting for the market moves overnight. That’s likely because other news is even more important to the future value of the company than the amount of the dividend paid, even if it’s news that causes the whole market to rally.
Chart 3: Stock prices fall when dividends go “ex-date,” but by less than the value of the dividend
4. U.S. AI stocks attract global investors, even as earnings broaden
Mostly, companies pay dividends as a way to share company profits with investors.
The third-quarter earnings season showed earnings broadening significantly – a healthy sign heading into 2026. More companies, across more areas of the economy, are returning to earnings growth. The proportion of companies beating expectations has also been growing. In Q3, it reached the highest level in at least 16 years, according to Barclays Research.
Despite the broadening of earnings, the focus last year was on the prices and earnings of AI, or “hyperscaler,” companies. One thing started to change in 2025: AI companies’ earnings started to deliver on expectations already priced into the stocks after many of these companies reached trillion-dollar market caps. In fact, in 2025, we saw their stock prices climbing less quickly than their earnings, resulting in the PE ratio of the largest AI companies actually falling (chart below).
Chart 4: Hyperscaler earnings growing faster than stock prices, leading to falling PE ratios
5. Markets head toward 24-hour trading
AI stocks are predominantly U.S. companies.
One consequence of the stellar performance of these companies has been to make the U.S. stock market popular for investors all around the world.
As Asian investors looked to buy U.S. stocks in the AI space, during their daytime, U.S. overnight volumes in stocks increased. As a result, the investment community pushed for exchanges to operate U.S. stock markets 24 hours a day – similar to Futures and FX and Crypto markets. One key reason for this is that some of the protections available to investors during the day (like an NBBO) could be applied to overnight trades, too.
Stocks work a little differently than these other asset classes though. For a start, settlement is “netted” on T+1, making the trade date important. Stocks also have corporate actions (like dividends and splits) that require the order book (bids and offers and share quantities) to be corrected before trading restarts, so that trading remains fair and efficient for arbitrageurs and investors.
Although the move to 24-hour trading has started, stock markets have decided they need time each day to make these adjustments and switch to the next day.
Interestingly, our data shows that there is a period from 4 p.m. Eastern Time to almost 10 p.m. Eastern Time, where few markets in the world are open (although New Zealand opens first, larger markets like Japan and Korea open around 8 p.m.). CME’s Globex Futures market takes advantage of this and pauses each night from 5-6 p.m. Eastern Time — although volume data shows stocks volumes are still elevated at that time, making it too early to pause stock markets.
Chart 5: As we head toward 24-hour stock trading, when should the day end?
6. Earnings stocks are active in after-hours trading
While we are looking at trading after the close, it’s interesting to investigate which stocks are trading.
When we analyzed after-hours trading, we found that many stocks rarely trade after hours at all. The breadth of trading activity drops drastically outside core hours.
- Even during the most active extended-hour period – from 4-8 p.m. – only 4,354 stocks (38.5% of the total listed securities) typically trade more than $10,000 in value.
- During overnight hours, the number drops further, with only 644 stocks per day seeing more than $10,000 value traded. In fact, only 1,403 stocks typically see any trades, highlighting the concentration of activity overnight.
In addition, as the chart below shows, stocks with earnings make up an outsized proportion of those active stocks. Data shows that, on the day each company announces earnings, the combined volumes of earnings stocks can account for 10%-20% of all value traded in the after-hours period.
Chart 6: Stocks with earnings are a large component of after-hours activity
7. If NBBO is important, market economics need to support it
One thing evident from investors and traders’ demands over the years is that NBBO is important. Efforts to restructure the SIP, shrink round lots, reduce ticks, expand 605 to institutional investors, and get exchanges to operate 24×7 are all designed to make the NBBO better and available to protect more investors.
But NBBO prices aren’t charity. The traders publishing lit prices on exchanges are hoping to capture spread. The spread that they quote will depend on the profit they make from spread capture.
It follows that if we want tighter spreads, we should reward spread capture more.
Chart 7: Competitive NBBO depends on traders capturing spreads
In that light, other trends in the industry are doing the opposite.
- Fragmentation of lit venues makes it harder for a trader to be at the top of the “right” queue and capture spread.
- Segmented markets filter profitable spread-crossing orders away from traders setting the NBBO, increasing the adverse selection on the NBBO.
- The pending reduction of rebates allowed will materially reduce the economics of providing liquidity at the NBBO.
- The potential elimination of the Order Protection Rule is also unlikely to benefit NBBO setters.
8. U.S. markets becoming increasingly dark
Highlighting the point above is the fact that much of the U.S. stock market is now more than 50% off-exchange (or “dark”). Excluding open and close, that is closer to 70%.
Academics have for years thought that the 50% level represents a “tipping point,” where the NBBO no longer rewards price setters and price discovery degrades.
And the data shows that it’s not just “low priced stocks that retail trades”. Large cap and even ETFs trade close to 50% off-exchange, too.
Chart 8: Almost all types of stocks are close to 50% (or more) off-exchange now
9. Smaller round lots fix part of the odd-lot problem
To be fair, changes are being implemented to make the NBBO better. One that went into place late in 2025 addressed part of the “odd-lot problem.”
Previously, all stocks needed to have 100 shares bid or offered to count for the NBBO. For a $1,000 stock, that was a large position and risk for a price setter (100 shares x $1,000 = $100,000) in an era when spreads are just 1-basis point (0.01%) for many sticks and trade size is closer to $10,000.
The change made round lots smaller for stocks over $250.
Importantly, although this change affected around 250 symbols (only 3% of listings), thanks to the fact that high priced stocks are often the largest and most liquid companies, this represents:
- 23% of the S&P 500 constituents.
- 38% of all value traded in the Nasdaq-100® (although only 17% of the shares traded).
- 36% of all value traded in the S&P 500.
Looking at the data after the change, these new round lots worked as expected. The market adapted to them and their new economics instantly –
- Spreads fell.
- Depth fell.
- Odd lots (still) frequently set a tighter spread inside the spread.
That means there are still “too many ticks” inside these new spreads. However, this early data shows (purple line) that although these stocks are not at their “optimal” spread – the U-shape is definitely flattened for higher priced stocks. In fact, now the NBBO resents to a $10,000 quote more frequently at higher stock prices, we see all the stocks priced above $250 trading more like stocks in the $150-$250 (and 100-share round lot) group.
We also note that the tighter odd lot spreads (yellow) will also likely be soon added to Rule 605 reports.
Chart 9: Smaller round lots let to better NBBO (although still not optimal spreads)
10. There is no silver bullet for optimal market structure
We have traveled through many of the topics that mattered in 2025, including:
- Macro and how important markets are for investors, companies and the U.S. economy.
- Protecting investors and helping improve the financial security of U.S. households.
- How microstructure matters.
To be fair, making markets amazing just by changing the market structure isn’t easy. That’s something that our blog comparing market structures of U.S. to Canada and Europe found. Instead, we saw that there is no silver bullet for optimal market structure. It’s hard to:
- Encourage innovation, while at the same time ensuring economics rewards a competitive NBBO.
- Reduce fragmentation costs while maintaining competition.
However, the data showed that market structure and the microeconomics of trading make a difference. For example:
- Canada has a far less fragmented market than both the US and Europe (Chart 10).
- Europe has the most level tick regime.
- Although the U.S. has the most liquidity (at least until compared to Asia, which also has significant liquidity from their retail investors).
Chart 10: U.S. markets are the most fragmented
Making stock markets better can benefit investors, companies and the economy
Sometimes, looking backward and understanding the successes and failures of history helps us make better decisions in the future.
This is especially true for stock markets. Data shows that macro- and microeconomics of stock markets matter. And successful stock markets benefit investors, companies and the economy.
One key benefit of stock markets over other asset classes is the competitively priced NBBO. That ensures efficient asset allocation and low trading costs for investors.
A market that is too fragmented or segmented makes trading harder. Spreads become more expensive. And both add to the costs of capital for companies, which reduces the attraction of being a listed company.
A market that is optimally efficient, protecting investors at low costs, will help grow the U.S. economy, finance investments and add to jobs. And when markets are available to the public, that’s something we can all be proud to contribute to.
