The Latest on Changing Market Dynamics

The average daily volume (ADV) for trading of U.S. Equities reached significant new records between 2020 and today. At the start of the COVID-19 pandemic in early 2022, equity volume peaked at 19.4 billion shares on February 8, 2020, then topped 16 billion shares per day for the month of March. A year later, the “meme” stock trading phenomenon again led to extraordinary trading volume, with 16 billion and 15 billion average daily executed shares in January and February 2021, respectively.

During the same 2020 – 2022 timeframe, there was an interesting change in the composition of trading in U.S. equities. NYSE listed securities (Tape A) experienced a steady decline in the percentage of overall U.S. equity trading, both in terms of shares traded and notional value. In the Figure 1 below, Tape A’s executed share market share went from over 50% in 2019 to 40% in February 2022. Similarly, in terms of notional traded share, Tape A stocks declined from over 40% in 2019 to 32% in February 2022. Between November 2019 and February 2021, peak-to-trough, Tape A’s executed share market share activity has declined by 19%. On the other hand, activity in NASDAQ listed stocks (Tape C) has grown by 19% during the same period. Tape C listed securities did not trade more than Tape A listed securities in the data we analyzed, which dates back to late 2007.

As shown in Figure 2 below, Tape A had an ADV of 3.8 billion shares and $145 billion notionally traded in first-quarter 2019. In first-quarter 2022, so far, that number has increased to 4.8 billion shares, up 26.8%, and $233 billion notionally traded, up 60.7%. During the same period, Tape C names saw a significant increase in activity, with 4.8 billion shares traded daily, up 108%, and $314 billion notional value traded, up 173%. While trading activity across tapes has grown because of the increase in overall market trading activity, Tape C’s growth has been proportionally larger than that of Tape A.

As illustrated in Figure 3 below, this shift comes to focus when looking at top 15 stocks across all tapes. From 2019 to 2020, Tape A stocks regularly appeared in the most heavily traded stocks on a share and notional-traded basis. However, in 2021 and so far in 2022, Tape C stocks are more heavily represented in the top 15 most actively traded stocks. This effect is even more apparent when focusing on notional traded activity for 2022, where Tape A does not have any representative stock in the top 15 average daily notionally traded.

Cboe ranks third overall in market share among major exchanges, across all tapes, as of the first quarter of 2022 to date. However, when each tape is examined individually, Cboe ranks second in terms of executed shares in each tape, as shown in Figure 4 below. In Tape C-listed securities, Cboe averages 649 million shares ADV and $40.1 billion dollars notional ADV, second only behind NASDAQ, the primary listing exchange of these securities.

The market dynamics have changed rapidly in recent years and continue to evolve quickly. Our team is constantly analyzing the financial markets for new trends and long-term changes. As the markets continue to evolve with investor sentiment, we are committed to sharing our findings and providing neutral analysis to help inform your trading decisions.

Cboe continues to enhance its product offerings to optimize our customers’ trade execution and experience. Our market innovations, such as EDGX® Retail Priority, EDGX/EDGA® Quote Depletion Protection (QDP), EDGX 4 a.m. Early Trading and the upcoming launch of BYX® Periodic Auctions continue to add value for our clients by improving liquidity and the overall trading experience on Cboe’s exchanges. Please reach out to our coverage team with questions and to learn how we can help you optimize your trading experience.

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