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.
