As equity markets continue to evolve, traditional assumptions around execution quality, liquidity access, and benchmarking are being challenged. We spoke with Armando Diaz about how fragmentation, shifting alpha dynamics, and new execution models are reshaping the landscape for institutional investors.

Fragmentation Beyond Venues: The Real Impact of the NBBO

While much of the conversation around market structure focuses on the proliferation of trading venues, Diaz argues that the more meaningful shift is happening within the NBBO itself.

“In our view the fragmentation of the NBBO is materially more impactful to execution outcomes than the proliferation of venues.”

As markets have become increasingly electronic, execution strategies have evolved. Algorithms now express urgency dynamically — starting with near-side placements, moving to midpoint liquidity, and ultimately crossing the spread when urgency peaks.

This has led to venue specialization:

• Exchanges dominate near- and far-side executions
• ATSs concentrate midpoint liquidity
• Retail flow increasingly trades at price-inaccessible points within the spread

The result is constant migration of child orders across the NBBO — a process that introduces information leakage and market impact.

“The child orders repeated migration across the NBBO results in information leakage and impact.”

This structural challenge has driven growing interest in streaming and trajectory-based execution models, designed to reduce signaling risk and improve liquidity access.

Centralizing Liquidity Through Trade-Based Execution

PureStream’s approach focuses on using trade reports — not quotes — as the foundation for execution.

“Irrespective of where a trade took place… it must be reported to the tape. By using those trade reports as our key input to streaming fills we centralize liquidity access across the entire NBBO and market.”

By referencing market-wide trades, orders on PureStream are effectively pegged to the last sale, enabling fills that reflect activity across all venues and price points.

This approach bypasses both venue fragmentation and positional fragmentation within the NBBO, offering a more unified view of liquidity.

Alpha Cycles Are Compressing

As competition intensifies, alpha windows are shrinking — forcing a rethink of execution strategies.

“Rethinking execution first principles and increasing the number of strategies used are critical to harvesting more alpha.”

Armando Diaz points out that the industry has leaned too heavily toward relative price optimization, often at the expense of accessing sufficient liquidity.

Near-side fills, which represent only a small portion of total volume, are heavily competed for. This can force orders to become price takers over time.

Streaming introduces a different approach: increasing participation without increasing order size.

“Now with streaming one can match at rates up to 500% to increase participation, without sending larger quantities.”

For example, at a 30% match rate, if 1,000 shares trade in the market, a PureStream order would execute 300 shares at that same price — scaling participation without adding market impact.

This ability to dynamically increase participation has led to improved outcomes in both price and liquidity capture, particularly when combined with traditional algorithmic strategies.

Moving Beyond the NBBO as a Benchmark

Looking ahead, Armando Diaz believes the industry must rethink its reliance on the NBBO as the primary reference point for execution quality.

“Preparing for a future where the NBBO shines a little less brightly as our north star of execution is critical.”

With tighter spreads driven by smaller round lots, markets are increasingly characterized by:

• Rapidly changing quotes (“vibrating” NBBOs)
• Smaller, more frequent trades
• Multiple NBBO updates per second

In this environment, quote-based benchmarks can become misleading.

“Representing the NBBO nominally as being 15 BPS wide is misrepresenting the reality that it was effectively 35 BPS wide over the average second.”

Instead, Armando Diaz advocates for trade-based metrics, such as measuring liquidity across meaningful volume thresholds (e.g., 10,000 shares), and execution models that reference actual trades rather than quoted prices.

A More Tradeable Future

As markets continue to evolve, one theme remains clear: execution is becoming more dynamic, data-driven, and trade-centric.

“Regardless of the path that markets develop in, it will be exciting and rewarding for the industry as more things become ‘tradeable’ and trade over more hours and in more volume.” From NBBO fragmentation to compressed alpha cycles, the shift toward trade-based execution models reflects a broader transformation — one where accessing real liquidity, minimizing information leakage, and adapting to market microstructure changes are key to staying competitive.

For institutional investors, rethinking execution may no longer be optional — it may be where the next layer of alpha is found.