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.
Yesterday we commented on closing auction volumes, which are, of course, composed of multiple trades in a stock at the same time and price – perhaps familiar to those of you who like to combine several presents together in one piece of wrapping paper. When it comes to a single large present it is always nicer when it comes as a surprise. Away from the auctions, most institutional traders target dark pools as an efficient way to shift large positions. With no guarantee of trading, most of these dark trading venues bring the advantage of mid-point pricing. Benefits include saving half the spread as well as reducing the information leaked when interacting with a public order book.
Inevitably at this time of year our thoughts turn to the important matter of choosing the right dessert to round off a hearty Christmas lunch. To get us in the mood, for our first 12 Days of Trading 2021 post, we decided to look at the Closing Auctions, the “afters” of the trading day if you like. We discovered that the top four largest ever auctions all occurred in 2021.
Is the fun about to come to an end for those trying to optimise (and capitalise on) their interaction with one of the most heavily traded equities in Europe? It has to be one of our favourite stocks for the complexity it presents for equity exposure to a single organisation. Two different lines of stock, both traded heavily on two primary exchanges. Competition aplenty from the UK and European MTFs and the full spectrum of market mechanisms accessible to trade; lit, dark, auctions, off-book (on-exchange), OTC….the list goes on. It presents a challenge for many investors, banks and brokers and a long standing opportunity for the canny arbitrageur.
On the back of the announcement of our partnership with ETFbook yesterday, we’re pleased to provide investors with our first weekly summary report of transparency in European ETPs, by consolidating all issued products and their liquidity across the fragmented landscape. These updates are for product issuers to monitor the evolving European ETP landscape, for market makers to gain an insight into primary and secondary market liquidity, and for buy-side investors to see new investment opportunities.
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.
Do some traders have an advantage over others… and does it matter? How fast are equity markets? Or how much of the market operates at high speed? big xyt took an electron microscope to our normalised market data to find out. We analysed UK lit markets to measure the time between a trade and the last relevant orderbook change. The FCA established 500μs as a speed benchmark in their latency races paper. This is 200x faster than the 1/10 of a second after the gun in which a sprinter can false start.
There is a difference between what people say and what they do. Companies are realising the importance of actions speaking louder than words and are beginning to focus on changing behaviours not just the “Values” statement on their website. Investments are no different as can be seen in our analysis today. Investment in companies with strong Environmental, Social and Governance (ESG) mandates are already being grouped together by ETF issuers to facilitate easier investment in ready-made portfolios of socially responsible companies.
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.
As a trailer for our forthcoming Q2 2021 survey of European equity market microstructure, we thought you might like a sneak peek at what’s been happening to fragmentation. Following Brexit and the divergence of dark trading rules, we have been monitoring the trend in the UK. The graph below shows the UK250 index where on-order book ‘lit continuous’ trading has reached a 5-year low in terms of the daily market share traded in June at just 28.5%, while auction market share is a whisker under the previous record high in December at 22.7%. Meanwhile, dark trading has risen to over 12% from 9% prior to October 2020.
