At the beginning of each month, Latter-day Saint congregations hold what is called a “Fast and Testimony” meeting as part of their regular worship services. It is on this day that Latter-day Saints refrain from eating or drinking for at least two meals, donate the money they would have spent on these meals (generally much more) to the Church’s humanitarian efforts and have an opportunity to share their testimonies with the congregation. Quite often, these testimonies contain phrases such as: “I know that God lives” or “I know that Joseph Smith was a true prophet of God.”
A unique aspect of Mormonism, and one which differentiates it from many other Christian sects, is that Mormonism teaches that a knowledge of the truth claims of Mormonism come from without the actual teachings and sacred writings of the Church. In other words, Mormonism does not use the Bible, Book of Mormon, or teaching of its prophets to argue for its authenticity or authority. Rather, Mormonism teaches that each individual must seek for truth by directly petitioning God. God will then reveal truth to the individual who petitions. Such truth is revealed through some sort of spiritual experience or experiences. These spiritual experiences continue throughout a Mormon’s life as he or she continually asks God for confirmation of truth and thus, these continual experiences become the anchor of a Mormon’s faith; they are often what Mormons turn to in times of struggle, doubt, and fear.
As one who is a non-believer in the vast majority of Mormonism’s truth claims, yet remains a committed Latter-day Saint, I have become increasingly uncomfortable with how freely my community uses the word “know.” In my view, the word “believe” may be a more appropriate word choice as it more accurately reflects the experiences described and sentiments expressed. This is not to say that individual Latter-day Saints do not genuinely believe that they “know” God lives, but what does it really mean to “know” something?
I use the Mormon experience to introduce the broader notion of distinction between belief and knowledge. As human beings we are constrained in what we can know but there are absolutely no constraints on what we can believe or in the things which we can have faith. For example, I know that Seattle exists. I have lived there, walked its streets, seen and touched its buildings, and directly experienced the city. On the other hand, I do not know that Tokyo exists. I have never been to Tokyo, never seen its streets or buildings or experienced the city. Now, I can state with near-certainty that Tokyo does exist simply because of the preponderance of evidence which affirms its existence. I have seen pictures and films of Tokyo. I have met citizens of the city who describe their lives there and the city’s ambience. I buy and use products developed and manufactured in Tokyo. Yet, to know Tokyo exists I must walk its streets and experience the city myself. This case of my knowledge of Seattle and near-certain belief in Tokyo demonstrates a small, but important point: knowledge and belief – even strong, near-certain belief – are distinct. Knowledge requires a level of experience that exceeds that necessary to formulate a strong belief.
Allow me explore a more esoteric example. I am a theist; a believer in divinity. I do not know God lives any more than I know Tokyo exists. Yet, I believe in God. Why? Simply because my experience, what I consider evidence, leads me to this belief. Belief is akin to faith and faith represents a hope for something unseen or for something which our level of experience cannot provide absolute knowledge. In other words, because of my experience (educational, spiritual, etc…) I hope God exists; I have faith in God. Having said that, I must freely admit that the evidence of Tokyo’s existence far surpasses that for the existence of God. In matters of faith and belief there are varying degrees. I never doubt the existence of Tokyo but at times, I do have doubts about the existence and nature of God; degrees of belief are a function how much stock we put into the evidence for any assertion of truth.
In the 1970’s the US congress created what is known as the National Market System (NMS) and mandated that the SEC create regulation to support the system. This regulation is known as Reg-NMS. The purpose of the NMS is to ensure that buyers and sellers of stock received the best price available at the time their buy or sell order was submitted.
As the NYSE and NASDAQ are the most widely recognized markets in the United States for the trading of stocks, many assume that these are the only venues where stocks like AAPL, IBM, MSFT, GE, and others are bought and sold. Such is not the case. In fact, there are currently 15 stock markets; what the NMS considers market participants, in the United States where stocks can be actively traded. Current market participants include:
· NYSE Amex
· NASDAQ OMX BX
· National Stock Exchange
· International Securities Exchange
· Direct Edge A
· Direct Edge X
· Chicago Stock Exchange
· New York Stock Exchange
· NASDAQ OMX
· NYSE Arca
· CBOE Stock Exchange
· NASDAQ OMX PSX
· BATS Y Exchange
· BATS Exchange
Many of the above exchanges have been in existence for quite some time and their existence is what prompted congress to mandate the creation of the NMS.
Say, for example, that the price of IBM is $100 at the New York Stock Exchange but is offered at the Chicago Stock Exchange for $99. If an order were sent to NYSE and executed at $100 the buyer would have paid $1 more than if her broker had sent the order to Chicago. Of course, this is fundamentally unfair and is the problem the NMS successfully eliminates.
When an order is sent to any market participant, the participant is obligated to route that order to the exchange with the best price. This is known as ensuring “best execution.” Brokers can, and often do submit orders to market participants with explicit instructions not to route the order but rather, to execute the order at the best price at that market center. There are many reasons a broker may choose to do submit orders with these instructions but is beyond the scope of what is being discussed here.
As an individual investor who chooses to buy stock through your broker, any order you submit may be executed on any of the 15 US stock exchanges. Your order will be sent to the exchange with the best price.
So how does each exchange know the best buy or sell price at any given exchange or what is known as the National Best Bid and Offer (NBBO)? Each market participant is required to continually publish their best price to what are known as Securities Industry Processors (SIPs). Today there are to SIPs: CTA and UTP. CTA is operated by the New York Stock Exchange and UTP is operated by NASDAQ. CTA reports trade and quote information for NYSE listed stocks (Tape A) as well as NYSE Amex and the smaller regional exchanges (Tape B). UTP reports trade and quote information for all NASDAQ listed stocks. For example, any trade or quote of IBM (a NYSE listed stock) will be reported by CTA and any trade or quote of AAPL (a NASDAQ listed stock) is reported by UTP. Recently, the BATS exchange announced that it will begin listing stocks and simply executing trades based on orders. At this point it is unknown which SIP will handle the consolidation of data for these stocks.
It is important to remember, however, that not all stock trades happen on an exchange. Let’s say a broker receives a buy order from one client and a sell order from another and the price of these orders are equal to the NBBO, the broker will execute the trade themselves without sending the orders on to any exchange. By doing so, they avoid paying fees charged by each exchange to both send orders, and execute trades to the market center. When brokers execute trades in this manner they are required to report the trade to a Trade Reporting Facility (SEC) as mandated by the SEC.
The NMS has played a significant role in the US equities market since its inception by providing a complete picture of US equity market activity throughout every trading day.