Within the context of market structure, the ever-evolving rules of the road for those attempting to navigate how and where to secure best pricing when executing equities orders has become so convoluted thanks to pay-to-play rebate schemes, its not only the curators at MarketsMuse who are scratching their heads, even the most sophisticated traders from both the buy-side and sell-side are confused.

As noted in today’s NYT article “Stock Exchange Prices Grow So Convoluted Even Traders Are Confused” by  reporter Nathaniel Popper, one of the sharpest knives in the drawer when it comes to distilling both technology and regulatory policy issues that impact financial markets, “computer-driven American stock markets have become so complex that any moment in time more than 800 different pricing possibilities are being offered to trading firms across 12 official exchanges, according to a report prepared by Royal Bank of Canada (RBC).”

Here are some of the noteworthy extracts from Popper’s piece:

“The level of complexity has grown to such an extent that it is unknown to most market participants,” said Mehmet Kinak, the head of electronic trading at T. Rowe Price Group, and a client of RBC with which the research has already been shared. “Instead of finding natural buyers and sellers, we’re finding intermediaries who come in and are benefiting from the complexity.”

“When we trade we don’t even know what it will cost us,” said Rich Steiner, the head of electronic trading strategy at RBC.

The prices are far from the only factor introducing complexity into the markets. Twelve public exchanges are now in operation, compared to a time when the markets were largely ruled by one: the New York Stock Exchange.Then there are the dozens of so-called dark pools, where stocks can be traded privately away from the public exchanges.

All of these trading venues offer many different types of orders that determine how and when a stock can be traded. A 2014 research report identified 133 unique order types, including some for particular times of the day and others for trades of a particular size.

RBC and other critics of the stock market structure argue that the rebates given out by exchanges can skew the incentives of brokers and banks, encouraging them to trade where they can get the largest rebate, rather than where they can get the best price for their client.

The pricing structures that RBC details in its new report are a result of the efforts by exchanges to calibrate the rebates they offer to some customers and the fees they charge to others.

In one example given in the report, the BATS-Y stock exchange — one of four stock exchanges run by BATS Global Markets — sent out a fee notice at the end of March 2014 announcing that it would offer 15-thousandths of a cent to traders buying certain stocks, thus bettering the 14-thousandths of a cent that Nasdaq BX had been offering. Fifteen minutes after the BATS-Y filing, Nasdaq made its own filing matching the new BATS-Y price. The next morning, BATS-Y filed again, increasing its offer to 16-thousandths of a cent.

Between 2012 and 2015, RBC found 362 filings with regulators announcing changes to trading fees, with some of the filings including multiple fee changes. The number of pricing tiers proliferates quickly because each tier can apply to similar trades in different ways depending on how frequently a trader uses a particular exchange.

Vimal Patel, who oversaw the research at RBC, said that he had no idea how tangled it had become until he began trying to sketch it out last summer. “It snuck up on people that the world is this complicated,” he said.

According to Popper, the new research from RBC is likely to strengthen the hand of an upstart company, IEX, that is currently asking regulators for approval to become an official stock exchange. Although IEX Founder/CEO Brad Katsuyama is a alumni of RBC, the report issued by the bank and scheduled to be submitted this week to a Senate Committee investigating market structure issues makes no reference to IEX.

For Popper’s story published by the NY Times, click here