Momentum to Carry B-Ds09.13.2011
The volatility in recent weeks may continue on through the coming months.
With the surge in volatility seen in August and the subsequent spike in trading volume, broker-dealers will stand to gain as the momentum carries on through the rest of the year.
“While volumes were obviously up Street-wide in August, we were particularly pleased to see our core institutional volumes surge to the extent that they did during the month, indicating that the buy side continues to look to Instinet as a safe harbor during periods of extreme volatility,” said Jonathan Kellner, president of Instinet.
The agency-only broker-dealer announced that it saw average daily U.S. equity volume of 431 million shares during the month of August, a 43 percent bump from July and a 74 percent increase from 2010. The firm also saw 363,000 U.S. equity options contracts traded per day during the month, up 288 percent from last year. It had a record high of 613,000 contracts on August 8.
“In the market, clearly there was an increase in volatility based on macro-economic news,” said Kellner. “Specifically for Instinet, in general, when there’s an increase in volume, we’ll benefit. When there’s increased volatility or macro concerns, people view us as a safe haven. When there’s high volume, they get a consistent experience at Instinet. They know we’re agency-only so we’re a stable counterpart for them.”
A few weeks ago Instinet also announced that it had reached record volumes in its Asia business unit, with $2.7 billion traded during the week of August 8 alone.
The company expects to see August have a carry-over effect for the coming months as well, as the global economic issues continue to drag on.
“We will see increased volume at least this month and into October,” said Kellner. “I don’t think there will be anything to decrease volatility at this point. We will see a heightened level of volatility over the rest of the year and will continue until these issues are resolved. It feels like we’re coming to a new norm in volumes, but we’re not sure where it will settle in.”
Recent downturn has shifted market from retail-heavy participation to more systematic/quant influence.
The ability to track volatility across multiple asset classes has never been more important.
Additional volatility due to unforeseen macro events, particularly the conflict in Ukraine, were contribers.
In March 2020 market-wide circuit breakers were triggered on four occasions in the US.
ESMA analysed actively managed equity UCITS relative to prospectus and market benchmark indices.