TRADING THE WEEK:  IPOs Could Prime Trading Pump Ahead of Jobs Data


Things could finally be picking up for Wall Street as it enters the final quarter of the year.

Traders reported generally quieter dealings last week as volatility was muted in anticipation of a brief hiatus before the Federal Reserve finally opts to raise short-term interest rates. According to a Bloomberg survey, the Fed remains divided on interest-rate increases, with the Washington, D.C.-based Board of Governors content to wait while some of the regional bank presidents say the time is now. In remarks last week, Philadelphia Fed chief Patrick Harker said that to avoid falling behind the curve, the central bank should begin raising rates, but economists say that is unlikely until Fed Chair Janet Yellen presses for it.

At this time, the market is pricing in a 25-basis-point hike in December, after the U.S. Presidential election. But that could change.

One trader said he expected activity to pick up despite the looming September employment report, slated for Friday, as the IPO calendar heats up.

“We had a good IPO with Nutanix on Friday and that could pave the way for new supply into the market and a resurgence of fresh buying interest,” said a floor trader in New York. “That buying interest could take on a life of its own and prompt more companies to go public.”

Nutanix, a San Jose-based tech company, brought its IPO and raised $238 million for the company at $16 per share, up from the $13 to $15 range talked about. The shares more than doubled at one point in Friday trading.

The New York Stock Exchange has 4 IPOs on tap for this week, while Nasdaq has 3.

In terms of volume, U.S. equity exchanges averaged 6.72 billion shares per day for the week ended September 30, according to Bats Global Markets data. That’s down from an average of 7.24 billion shares in the week ending September 23.

And speaking of Bats, last week CBOE Holdings agreed to buy the Kansas City-based exchange operator , in a move that combines one exchange operator known for its product development with another that’s known for its technology.

Jamie Selway, managing director and head of execution services at ITG told Markets Media in an interview that the deal announcement makes sense as CBOE had been looking for an independent path, rather than be swallowed up by CME Group or another larger rival as market participants have long considered a possibility.

“Given CBOE’s size relative to other exchanges there had been speculation that they might eventually be acquired,” Selway said. “In addition to increasing their size, a Bats acquisition offers CBOE a technological upgrade and also broadens out their product set by adding European and U.S. equities, additional scale in the options business and an FX capability via the Bats Hotspot platform.”

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In related market news, today marks the beginning of the U.S. Securities and Exchange Commission’s Tick Pilot program. The pilot program is designed to evaluate whether or not widening the tick size for securities of smaller capitalization companies would impact trading, liquidity, and market quality of those securities.

The total number of securities will be fixed at 3,000 names and Finra has already assigned the securities for each of the three test buckets, roughly 400 securities in each bucket. The control group will have 1,800 securities in it that will trade under existing rules or at one cent increments and possibly in sub-penny increments.

The Pilot will last two years.

In a conversation with Traders Magazine, a Markets Media publication, Charles Susi, co-head institutional equities and Brian Bulthuis, head of quantitative research client execution services at KCG, both of whom took a few moments to speak exclusively about how the firm altered its trading technology ahead of the pilot.

Susi told Traders that the firm re-examined the Pilot’s changes and how they would affect market structure and the potential impact on areas such as market forecasting, venue performance, liquidity, fair value models, order types and each algo at every urgency level. Among the principal changes to its trading platform, Susi added that market forecasts such as spread and quote size curves were updated to reflect anticipated stock behavior. Also venue allocations were re-optimized to account for expected liquidity changes and that strategic liquidity add and take decisions changed to be sensitive to likely changes in midpoint liquidity levels.

For the full interview with Susi, please click here

This Week’s U.S. Economic Indicators of Interest:

Monday Purchasing Managers Index

ISM Manufacturing Index

Construction Spending

Tuesday Redbook Retail Sales


Wednesday International Trade


Factory Orders

Thursday Jobless Claims


Employment Report


Consumer Credit


More on Trading:

Will LSE’s Sale Satisfy Competition Regulators ?

Syndicated Loan Market Moves Toward Blockchain

Trading Europe From ‘Across the Pond’




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