After our first post of this series where we highlighted three stocks with large price reversion before and after the close on 30th November, we had several enquiries asking if we have an easy way to identify these moves. When using data analytics to support trading decisions, one can try to gain an insight from a snapshot of information to simplify something complex or often, more valuably, to identify a trend or pattern. Either way it is like a game of I Spy.
After a traumatic 12 months, we thought you might be feeling a little bristly in the lead up to the holidays. What better way to complement the mood than by looking at the impressive volume spikes of 2020. We’ve put together A Hall of Fame for those days over the last four years where traded value has exceeded 100 billion euros. The trophy for the highest number of days – 15 – sits securely on 2020’s mantelpiece, and the overall winner is February 28th, with a traded value of 132 billion euros. In a broader context, that means that 15 out of the 21 days were in 2020, including 10 out of the 17 days between February 28th and March 20th.
In the past we have commented about the dangers of trading at the Close on days when there are significant trading volumes expected. Last week’s MSCI rebalance showed us new examples of the dangers. Taking the official close as a stick in the sand, we calculated the volume weighted average price (VWAP – excluding the Close) as a proxy for an “average price” that might have been achieved by trading in the continuous market. We compared this to the official Closing price to identify large differences representing significant opportunities for profit or loss depending on whether you were on the “right’ or “wrong” side of the trade. For many stocks, these auctions resulted in significantly higher volumes of trading than the average total daily volume, not just the average closing turnover. That extra size traded magnifies the extent of the P&L.
For traders and portfolio managers who are navigating the European market structure landscape or want a refresher, big xyt is introducing a series of briefings to help you get to grips with the market mechanisms, and to help users of our analytics tools.
Following the theme of Closing Auctions and new Alternative Closing Mechanisms, we can highlight a noteworthy entry to the Closing Auction records books last Friday. In the chart today we see the 5 largest single stock closing auctions in recent (4 years) history. Notably, Linde AG has featured twice (holding the previous record of @4.3bn traded). Unilever plc/NV was the cause of the stir as it collapsed its NV holdings into the plc to consolidate its HQ in the UK whilst maintaining a quoted presence in Amsterdam….all in the interest of simplification, naturally.
Last month we touched on the growing number of Alternative Closing Mechanisms available to the equity trading community as we added the new Turquoise Plato Trading at Last to our Enterprise menu. Within a few days we saw that Deutsche Bourse were introducing Xetra Trade-at-Close, and last week we added this to the menu. With the MSCI rebalance yesterday, all eyes will have been on the closing prints..….but which Close? To sign up for a free trial of the
Picture the scene. Lap 20, Hamilton, as usual, has a 15 second lead (almost enough time for a free pit stop), and a little more unexpectedly, Bottas is running a strong second, 10 seconds ahead of the third place car. Then, shock, horror, for the first time in five years, both Mercedes have to return to the pits with a mechanical issue on the same lap. For the rest of the field, the race is on again. The rare opportunity for a podium presented on a plate. But, hold on, what is happening? One by one they all return to the pits and wait patiently until Lewis and Valtteri have their proverbial pipes cleared and are ready to rejoin. The clock counts down and the race resumes as if a virtual safety car was being controlled and temporarily parked by the pit crew of the lead team.
Our very own Mark Montgomery took part in Harrington Starr‘s second installment of The Fintech Focus TV Debate Series, alongside Steve Grob of Vision57, Mike Powell of Rapid Addition Limited, Jon Butler of Velox, and Reena Raichura of Glue42, to discuss changes in the FinTech space. “People are concerned with transference of data – at big xyt you don’t need to transfer your data to us; we can independently benchmark your trades by you interrogating the data through our API for the results that you are looking for. If you can independently source the information, and you can create your own reports, we don’t need to tell you what benchmarks to use, or what analysis to do. That’s up to you!”
If you are benchmarking against the Official Close, how are you ensuring you have an independent view of which stocks, how much, and if anything is trading at the closing price on another venue? Demand for the official close as a benchmark has led to the introduction of alternative closing mechanisms by MTFs to challenge the predominant position of Exchanges. We began examining this area in more detail last year, and as new players have come to the table, we have been enhancing the scope of our radar.
A sudden recovery in trading volumes in the energy sector is just what we would have expected from the news of the vaccine last week, and it’s in line with the broader market. The news may only be a light on the horizon, but a return to normal levels of trading activity will show that investors are returning to the stage. The bubble chart shows the relative difference between each share’s average daily volume per month versus the average daily volume for the whole period, beginning in October 2019. The size of the bubble shows the average daily volume in euros for each month. For example, a normal range for Royal Dutch Shell Plc is around 800M€ to 1050M€ per day.
