Off-Exchange Volume Spikes to Record Levels
Traders Magazine Online News, January 30, 2013
In the first 20 trading days of 2013, five of the top 10 days for off-exchange trading on Tape A have been recorded. This includes three out of the top four: January 23, at 37.9%, January 9 at 37.5% and January 28 at 37.3%. The fourth? A month ago, Dec. 18.
On Tape B, six of the top 10 days for off-exchange trading have occurred in the first month of the year (see chart). The highest, to date: January 28, at 38.5%.
And on Tape C, Monday’s trading of 813.9 million shares off-exchange was the second biggest day, in share of all trading, for Nasdaq-listed stocks.
“We think the data is consistent with previous points we’ve made about the widening gap in trading between exchange and non-exchange venues,” said Richard Adamonis, senior vice president of communications at NYSE Euronext.
Credit Suisse pegged off-exchange trading on Monday at 37.5% of all stock trading. Mathisson said the month with the highest percentage-of off-exchange trading remains April 2010, at 39.5%.
On-exchange share of trading, by month. From Credit Suisse.
The Securities and Exchange Commission, whose previous chairman cited the rise in off-exchange trading as a potential problem for public markets, declined to comment on the new-year spike.
In speaking to the Economic Club of New York in September 2010, however, then-chairman Mary L. Schapiro expressed concern about trading “in non-public, dark trading venues, such as dark pools and internalizing broker-dealers,” when the percentage reached 30 percent, up from 25 percent a year earlier.
Her comments came after she released a concept paper on market structure in January and the Flash Crash of May 6, where the share volume handled by off-exchange venues fell from 30 percent to 10 percent at the height of the 1,000-point plunge.
“Can we expect the public markets to handle nearly all the order flow in tough times, yet be bypassed routinely by a large volume in normal times?,’’ she asked.
Given the public markets’ “unique role in price discovery, we must be careful that the short-term advantages to individual traders from non-transparent trading does not undermine all investors in the long run,’’ she said.
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