In the past few weeks, we have shown data on the growth of dark trading<\/a> and the increasing fragmentation<\/a> of lit exchanges. Today, there are 16 equity exchanges, over 30 ATS venues, and more than a hundred brokers in the U.S. \u2014 and they\u2019re all competing to provide trading services.\u00a0<\/p>\n That sounds like a lot of fragmentation<\/a> in the market, which at some point might result in more costs<\/a> than benefits to investors.<\/p>\n Today, we\u2019re going to use the same test the U.S. Department of Justice (DOJ) uses for mergers. That test shows that the U.S. stock market is, already, highly<\/em> competitive.<\/p>\n The DOJ uses the Herfindahl-Hirschman Index (HHI) when considering the antitrust implications of mergers and acquisitions. The HHI, based on the work of economists Albert Hirschman and Orris Herfindahl, uses the market share of all the firms in an industry to measure how concentrated it is.\u00a0<\/p>\n In simple terms, the HHI index is created using the weights of each company in an industry. To do this:<\/p>\n We show some examples of how the math of HHI works in Chart 1 below. The more concentrated \u201cIndustry A\u201d scores 3400, while the more competitive \u201cIndustry C\u201d scores 900.\u00a0<\/p>\n Chart 1: Competitiveness changes based on the number of firms and their market shares<\/strong>\u00a0<\/p>\n <\/source><\/source><\/source><\/picture>\n<\/p><\/div>\n<\/p><\/div>\n<\/p><\/div>\n In the DOJ\u2019s view, an HHI score<\/a> above 1800 is uncompetitive, from 1000 to 1800 is moderately competitive, while an industry scoring below 1000 is highly competitive.\u00a0<\/p>\nThe DOJ uses HHI as a measure of competition<\/strong><\/h2>\n
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![\"Competitiveness](\"https:\/\/www.nasdaq.com\/sites\/acquia.prod\/files\/2025\/04\/03\/Screenshot%202025-04-03%20at%205.07.23%E2%80%AFPM.png\")
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![\"The](\"https:\/\/www.nasdaq.com\/sites\/acquia.prod\/files\/2025\/04\/03\/Screenshot%202025-04-03%20at%205.09.52%E2%80%AFPM.png\")
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