To finish off the week, the 12 Days of Trading 2022 continues its longitudinal leaping, this time southwards across the Alps from Prague to Bergamo, famous for its Elfredo pasta. Today’s festive topic is deer to our hearts; latency. Given the proposed changes mentioned this week, we take a look at how DVC and SI activity has changed over time, which may help us anticipate what to expect next. But hold on, it just occurred to us that this actually has a lot in common with a practice in equity markets. Managing index constituents during a rebalance with a target benchmark of the Closing Price.
At this time of year, we work hard to ensure that we don’t disappoint our friends and relatives on the big day. We order the food and drink well in advance, we carefully choose the gifts, and we stock up on spare batteries for the remote control. It’s all about avoiding disappointment by creating certainty.
As we gently ease into the festive season, the big xyt team is pleased to bring you Season 5 of the ‘The 12 Days of Trading’, a light-hearted look at some of the highlights of the trading year and its curiosities. This year, just like Santa, we begin our quest in the antipodes with a quick look at fragmentation in the region.
Trading turnover in European equities posted a new MiFID II era record in Q1, 34% higher than the four year average, as investors reacted to the cocktail of inflationary fears and war. Back in Q1 2020 it felt like we were watching a truly exceptional event but despite lower volatility, the markets managed to deliver something even more unpredictable. Please have a read of our latest European market microstructure and let us know your thoughts or ideas for any further investigations.
2021 has ended and all that remains are the tea leaves at the bottom of the cup. In our latest annual survey of market volumes and fragmentation trends in European equities, we gaze at the patterns to see how the story unfolded and what we can learn about the year ahead. Another turbulent year for equities globally played out in the daily ebb and flow of over 250 billion quotes, orders and trades, presented to you here in a short pictorial summary.
Whilst the Italians enjoy a good hearty feast on Christmas Day, traditionally they give and receive gifts on January 6th – the 12th Day of Christmas. There was a big Italian gift in the spring of this year too when ownership of Borsa Italiana was transferred (for a small fee) by LSEG to Euronext. Given this change and the implications of Brexit for European exchanges and venues, it occurred to us that it might be interesting to take a look at the Italian market to see if things have settled back to (the new) normal.
At this time of year the discussion often turns to how Father Christmas is able to get around so many households in just one night. For sure, the sleigh is fitted with the latest technology such as smart routers and machine learning algorithms to plot the optimal course between well behaved children. But the evidence is building that in his day job the big man may be a high frequency trader. The time it takes to get between Madrid and London at light speed is around four milliseconds. Of course, that’s the physical limit and there are plenty of items that cause friction such as chimneys and church steeples, or if you are a high frequency trader, firewalls and trading controls. The parallels are obvious.
At big xyt, we like to think big. At Christmas there’s nothing like a big pile of presents under the tree on Christmas morning and the big parcels are often the least expected and the most surprising. It’s got us thinking about the biggest corporate events of the year. One in particular springs to mind which was the share swap between Naspers Ltd and its sister company, Prosus NV. Naspers was the most traded name on the Johannesburg Stock Exchange (also the home of the Huge Group by the way!) at around €250M per day, with Prosus in second spot with around €100M. Together, they are the top two names in the JSE’s SWIX index with about 20% share of overall market volumes.
The summer saw increased nervousness in the European markets in reaction to a fragile recovery from the pandemic and concerns about the spectre of inflation. However, trading in equities remained quite buoyant, especially in September, and Q3 volumes returned to their seasonal, pre-pandemic average, in contrast to last summer’s record breaking doldrums. Welcome to our latest quarterly survey of market volumes and fragmentation trends in European equities. If you are unfamiliar with the topic, we encourage you to visit our website to read our Microbites series for an explanation of European market microstructure.
Welcome to our latest quarterly survey of market volumes and fragmentation trends in European equities. If you are unfamiliar with the topic, we encourage you to visit our website to read our Microbites series for an explanation of European market microstructure. With the major European indexes enjoying substantial price gains in H1 2021, we might have expected a similar boost in market volume. However the quarter just finished was the weakest Q2 in over four years. In this edition of the survey we have added a view of the ETF market, which by contrast has grown in volume terms by 6.5% versus 2020, albeit on a cross-asset basis.
