Kevin Tyrrell is Head of NYSE Research.

What were the key theme(s) for your business in 2021?

The year 2021 set a second-straight record for new listings on the NYSE, adding more than $1 trillion in new market capitalization. The year’s IPOs, direct listings and SPAC business combinations were able to leverage the NYSE DMM model to maximize liquidity and price stability for the opening auction and first minutes of trading. Retail trading also remained a major theme, punctuated by the growing interest in “meme stocks” that began in January. Importantly, retail trading growth impacted the listed options market even more than the underlying cash equities market. Options market volume is roughly double the level of two years ago, and this has important spillover effects for the cash market. This robust capital markets activity and retail participation led to high market volumes, but given elevated levels of fragmentation, high volumes did not necessarily lead to ample liquidity for institutional orders.

What are your expectations for 2022?

There was constant speculation throughout 2021 about potential changes to equity market structure, particularly around retail order handling. The SEC has already issued several rulemaking proposals covering a number of market structure issues, and we expect more to come. At the same time, higher levels of retail activity do not seem to be going away, and we expect market participants to continue working to expand and optimize their opportunities to interact with this order flow. For example, we have been having many conversations with a range of market participants on the NYSE RLP program, which allows anyone trading on our exchange to offer price improvement to marketable flow from retail traders. We believe that this program helps make retail flow accessible to a broader set of investors, while providing improved execution quality for retail traders.

What trends are getting underway that people may not know about but will be important?

There appears to be an increasing divergence in market characteristics between the most widely held stocks, such as those in major large-cap indices, and other issues that are not part of major indices. These other stocks are often quite popular with retail traders but less so with institutional traders. The higher share of retail participation in these stocks should mean that trading is more likely to occur at different times during the day. For example, we tend to see these stocks trading more pre-market, post-market, and in the first hour of trading than stocks that are in major indices. These stocks also tend to have higher levels of off-exchange trading, creating additional complexity to find liquidity.