In the chapter, we discussed a number of problems in markets that arise from legal practices and norms, but might be worthy of discussion by regulators. Consider the following issues:

a. Payment for order flow and the liquidity maker-taker pricing schemes have been criticized for creating conflicts of interest between brokers and their clients. Devise and discuss some strategies for mitigating the conflicts that are associated with these practices, assuming that the practices are continued.

b. Traders have complained that market liquidity is often not what it appears because when they place market orders in response to quotes; the quotes disappear before their orders are executed. That is, quotes are canceled between the times traders initiate responses to them and when the executions are attempted; the quotes are simply not reliable. In fact, in many markets, over 95% of quotes are canceled rather than executed. Devise and discuss some strategies for making quotes more reliable to traders.