By Terry Flanagan

Volatility Lifts B-Ds

Record trading volume in the third quarter was a boon to the bottom lines for many of the big broker-dealers.

Several of the large broker-dealers have released their third quarter performance figures, with some capitalizing on the substantial volatility and order flow better than others.

“In the third quarter of 2011, Knight generated strong financial results in relatively good market conditions,” said Thomas Joyce, chairman and chief executive officer of Knight Capital Group in a conference call. “At the start of August, volatility rose sharply following the downgrade of the U.S. credit rating. Both institutions and retail actively traded throughout momentum swings in August. Investors turned defensive in September.”

Knight recorded earnings of $26.9 million on revenue of $397.4 million during the quarter. This was a substantial increase from the $200,000 in income and $239.5 million during the same period last year.

It also saw an increase in average daily equities dollar volume traded in September, at $32.1 billion, from $23 billion last year. However, it was a drop-off from the $41.4 billion seen in August. The shares traded on average was also up to 190 million from 142.6 million.

Citigroup had a successful three months, with net income coming in 74 percent higher year-over-year, to $3.8 billion. Bank of America also saw a big bump in earnings to $6.2 billion from a $7.3 billion loss last year.

JPMorgan Chase for the quarter had net income of $4.26 billion on revenue of $24.37 billion. Not only was this down from the second quarter, but it was also a drop off from the $4.4 billion seen in Q32010.

The Chicago Board Options Exchange’s Volatility Index, or VIX, reached a high of 48 on Aug. 8, as the markets reacted to the debt ceiling situation and the Standard & Poor’s downgrade of U.S. debt. It then fluctuated through the mid-30s until recently spiking up to above 45 in early October. As of mid-day Oct. 24, the VIX has been trading at about 29.

Related articles

  1. Volatility Poised for Upswing?
    Contributed Content

    Volatility in U.S. Equity Markets

    Innovation and technology can help the buy side source liquidity, Chris Fiorito of River Road AM writes.

  2. Volatility Back 'With a Vengeance'

    The exchange now offers 40+ CVOL indexes across nearly every major investible asset class.

  3. Squeezing Alpha From Volatility

    Circuit breakers were triggered in March 2020.

  4. Market Volatility Boosts Options Volume

    The number and size of margin calls can contribute to stress in the financial system in extreme volatility.

  5. FX Volatility Here to Stay

    The new indexes are based on energy, metals and agricultural markets.