In the land of fragmented trading markets, the public stock exchanges still reign supreme when it comes to trading volume, besting their dark counterparts during the first quarter of the year by over 10 percent.
That’s according to the latest Tabb Group research, “U.S. Equity Market Structure: Q1-2015 TABB Equity Digest,” co-written by Sayena Mostowfi, TABB principal and director of US equity research, and research analyst Valerie Bogard. According to Mostowfi, for the first five months of 2015, the industry volume consisted of 56.2% Lit Volume and 43.8% Dark Volume (flat YOY, at 56.3% and 43.7%, respectively), with “Dark Volume” consisting of Retail Wholesalers, Dark ATSs, Hidden Exchange and SDPs/Other.
Trade Reporting Facilities (TRFs) volume (excluding Alternative Display Facility) was flat, at 36.1%, relative to 35.9% in the same period in 2014 and 36.0% in 2013.
Year-over-year, TRF market share decreased for Tape A (-1.7%) and Tape C (-2.0%); however, TRF market share for Tape B (+2.3%) increased during the same period, largely due to higher retail activity.
However, Mostowfi and Bogard said that retail wholesaler market share has increased from its two-year low in Q4-2014 of 16.7%, to 17.2% in Q1-2015, along with a .5% downtick in Hidden Exchange Volume.
The dark volume breakdown in Q1-2015 was 39.4% retail wholesaler, 32.7% dark ATSs, 20.6% hidden exchange and 7.3% SDP/Other.
During the same time period, retail wholesalers’ execution quality hit an all-time high, with the effective/quoted spread % having decreased 50% (April 2015 E/Q=47) since the full implementation of Rule 605 (SEC 11Ac1-5) in October 2001.
The steep retail wholesaler competition is reflected in two firms exiting the business and one new entrant thus far in 2015, Tabb concluded.
