Hello everyone, Phil Mackintosh here, Nasdaq Chief Economist.
2025 was quite a year, wasn't it? From the buzz around Artificial Intelligence (AI) and the growing dominance of U.S. tech companies to the evolving landscape of global investing, our markets were certainly dynamic. These trends, in turn, fueled discussions around off-exchange trading and the push for 24-hour trading, making the National Best Bid and Offer (NBBO) more critical than ever.
Today, I want to walk you through my 10 favorite charts from last year, offering a fresh perspective on what truly shaped our financial world.
1. Stock markets are good for the economy
It might seem obvious, but let's dive into why robust stock markets are a cornerstone of a healthy economy. When accounting standards make it easier for investors to efficiently value companies and allocate capital, it's a win-win. That capital allows companies to expand, innovate, and hire more workers, while investors own a share of those returns. Our data clearly shows that countries with higher direct stock ownership—like the U.S., Sweden, and Australia—tend to boast higher valuations. This isn't just theory; it translates into lower capital costs for businesses, making more investments even more likely. This ties into a WFE paper we referenced, which found that countries growing their equity markets experience stronger GDP growth. For individual investors? Stocks remain a powerful engine for long-term wealth creation. It's a symbiotic relationship: public access to companies, transparent prices, clear accounting data, and companies interested in going public all contribute to stronger economies and household finances.
2. Markets help companies finance in many different ways
Speaking of companies raising capital and distributing returns back to their investors... While Initial Public Offerings (IPOs) grab headlines, they're just one piece of the capital-raising puzzle. SIFMA data highlights that IPO proceeds are a fraction of all capital raised by the U.S. stock market each year. For example, in 2024, IPOs raised $30 billion, but secondary offerings dwarfed that with almost $170 billion. And it's not just about raising capital; companies also return significant value to shareholders. According to the Wall Street Journal, companies spend around $1 trillion each year on buybacks—significantly more than primary and secondary finance combined. Interestingly, buyback finance is concentrated, with the top 11 companies accounting for almost half, or $500 billion, of announced buybacks. These values rise and fall with earnings strength and the economy. Add to that another $1 trillion each year in dividends, which tend to be much more consistent over time. These mechanisms are vital for capital allocation and shareholder returns.
3. Stocks don’t adjust 100% for the value of a dividend
Here's a neat little quirk about dividends. You'd expect a stock's value to decline by exactly the dividend amount on its 'ex-date,' right? After all, that cash leaves the company's balance sheet. But our analysis reveals a different story: stock prices do adjust immediately, but the median decline was only around 90% of the dividend amount. The most likely outcome is actually an even smaller drop. Interestingly, a reasonable percentage (about 20%) of stocks see prices increase on ex-dividend date, even after accounting for overnight market moves. This likely means other news is even more important to the company's future value than the dividend paid, even if it's news that causes the whole market to rally. It underscores that while dividends are important, the market's forward-looking nature often prioritizes other factors.
4. U.S. AI stocks attract global investors, even as earnings broaden
The AI revolution dominated headlines, and rightly so. U.S. 'hyperscaler' companies became global darlings. What's fascinating is that in 2025, these AI giants started to truly deliver on their lofty valuations. After many reached trillion-dollar market caps, we saw their stock prices climbing less quickly than their earnings, resulting in the P/E ratio of the largest AI companies actually falling. This signals a maturation, moving from speculative growth to tangible results. Meanwhile, the third-quarter earnings season showed earnings broadening significantly across more areas of the economy, a very healthy sign heading into 2026, with the proportion of companies beating expectations reaching a 16-year high.
5. Markets head toward 24-hour trading
The global appeal of U.S. tech, particularly AI, has fueled a demand for 24-hour trading. As Asian investors looked to buy U.S. stocks during their daytime, U.S. overnight volumes increased. The investment community pushed for exchanges to operate U.S. stock markets 24 hours a day, similar to Futures, FX, and Crypto markets. One key reason is that protections like the NBBO could be applied to overnight trades. Stocks work a little differently, though. 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 to be corrected before trading restarts. While the move to 24-hour trading has started, stock markets have decided they need time each day for these adjustments and to switch to the next day. Our data shows a period from 4 p.m. Eastern Time to almost 10 p.m. Eastern Time where few major global markets are open. CME’s Globex Futures market pauses from 5-6 p.m. ET, but stock volumes are still elevated then, making it too early for stock markets to pause.
6. Earnings stocks are active in after-hours trading
Speaking of extended hours, not all stocks are equally active. When we analyzed after-hours trading, we found that many stocks rarely trade at all outside core hours; the breadth of activity drops drastically. Even during the most active extended-hour period (4-8 p.m.), only 4,354 stocks (38.5% of listed securities) typically trade more than $10,000 in value. During overnight hours, this drops further, with only 644 stocks seeing more than $10,000 traded daily, highlighting the concentration of activity. Unsurprisingly, stocks announcing earnings are a massive driver of this activity. On the day each company announces earnings, their combined volumes can account for 10%-20% of all value traded in the after-hours period. This highlights the market's immediate reaction to fundamental news, even outside standard trading times.
7. If NBBO is important, market economics need to support it
The National Best Bid and Offer (NBBO) is foundational for investor protection and efficient markets. Everyone wants a tighter, more accessible NBBO, and efforts like restructuring the SIP, shrinking round lots, and expanding Rule 605 are all designed to improve it. But here's the rub: the traders publishing lit prices on exchanges are hoping to capture spread. The spread they quote depends on the profit they make from spread capture. It follows that if we want tighter spreads, we should reward spread capture more. Unfortunately, other trends are doing the opposite. Fragmentation of lit venues makes it harder for a trader to be at the top of the 'right' queue. Segmented markets filter profitable spread-crossing orders away from NBBO setters, increasing adverse selection. The pending reduction of allowed rebates will materially reduce the economics of providing liquidity, and the potential elimination of the Order Protection Rule is also unlikely to benefit NBBO setters. If we want a robust NBBO, we need to ensure the market structure incentivizes its creation.
8. U.S. markets becoming increasingly dark
This point ties directly into the previous one. A significant portion of the U.S. stock market is now more than 50% off-exchange (or 'dark'). Excluding open and close, that figure 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 stocks and even ETFs trade close to 50% off-exchange, too. This trend raises serious questions about the health and efficiency of our lit markets.
9. Smaller round lots fix part of the odd-lot problem
On a more positive note, we've seen proactive changes to improve the NBBO. 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 ($100,000) in an era when spreads are often just 1-basis point (0.01%) and trade size is closer to $10,000. The change made round lots smaller for stocks over $250. Importantly, although this change affected only about 250 symbols (3% of listings), thanks to the fact that high-priced stocks are often the largest and most liquid companies, this represents 23% of S&P 500 constituents and 36% of all value traded in the S&P 500. Looking at the data after the change, these new round lots worked as expected: spreads fell, depth fell, and odd lots still frequently set a tighter spread inside the spread. This early data shows that while these stocks are not at their 'optimal' spread, the U-shape is definitely flattened for higher-priced stocks. Now, the NBBO more frequently represents a $10,000 quote at higher stock prices, making all stocks priced above $250 trade more like those in the $150-$250 (and 100-share round lot) group. We also note that the tighter odd-lot spreads will likely soon be added to Rule 605 reports.
10. There is no silver bullet for optimal market structure
After exploring these diverse trends, one truth becomes clear: there's no single 'magic bullet' for perfect market structure. It's a delicate balancing act. We need to encourage innovation while ensuring economics rewards a competitive NBBO, and reduce fragmentation costs while maintaining competition. Our blog comparing market structures of the U.S. to Canada and Europe highlights this complexity. For example, Canada has a far less fragmented market than both the U.S. and Europe, and 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). Each market has its strengths and challenges. The key takeaway? Market structure and the microeconomics of trading profoundly impact investors, companies, and the broader economy.
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. Thank you.
