Volatility Boosts Block Trading

Terry Flanagan

The surge in volatility during August gave a boost to block trading.

Alternative trading platforms focusing in large, block order trades, such as BIDS Trading, were among the market participants to have benefited from the tumult and volatility seen last month.

“It was a record month for us, we traded 88.8 million shares per day,” said Tim Mahoney, chief executive officer of BIDS. “The old record was about 76 million, so it was obviously a big, big month for us.”

BIDS has seen its ATS increase garner significant gains year-over-year in average daily volume. In the third quarter, which is still ongoing, BIDS has averaged nearly 90 million shares traded per day, nearly doubling its performance a year ago, when it averaged about 45 million shares daily. The gains were also likely seen by BIDS’ competitors.

“My guess is most people were up 20% or more,” Mahoney said. “August was a great month for everybody in the business.”

Mahoney, along with most market participants, credits the ongoing macroeconomic issues and uncertainty for the record-setting month.

“It was solely based on macro factors driving the marketplace,” said Mahoney. “It was the continued disarray in Washington D.C., the overall economy and the economic concerns from Europe. There was the funding issue coming into August from July and the credit downgrade. It was all driven by macroeconomic factors. It all tied together and was the main driver of volume.”

Many of the major exchanges recently reported their trading volume statistics for the month of August, with some also achieving record highs. The IntercontinentalExchange saw a 37 percent jump in futures average daily volume for the month. The International Securities Exchange also saw big gains, with a 75.2 percent bump. NYSE Euronext experienced a 65 percent increase in global derivatives ADV. The Chicago Board Options Exchange and CME Group each posted all-time high trading volumes for August. Futures trading of CBOE’s Volatility Index, or VIX, also established an all-time high, with 1.8 million contracts traded for the month, or 79,402 per day, a 500 percent increase from a year earlier. CME’s record setting month produced a 46 percent increase from last year. Metals trading at CME was up 131 percent, as investors flocked to the safety of gold.

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