Market Volatility Means Spike in Institutional Volume
August 10, 2011
Institutional traders trying to move large blocks of stock in the face of market swings are driving venues such as Liquidnet to new volume records.
Liquidnet, which operates a dark pool where the average trade size is more than 52,000 shares, said Tuesday was its highest volume day of the year, as investors moved actively and rapidly to respond to the previous day's 634-point plunge in the wake of the first-ever downgrade of U.S. debt and then the comments of the Open Market Committee at the Federal Reserve Board, on the nation's prospects and its plans for interest rates. The volume: 109 million shares.
The global institutional marketplace said volume in the first week of August was the highest since November 2008, when investors were nervous about the widening global financial crisis set off by the implosion of the sub-prime mortgage market. Liquidnet said 434 million shares traded in the U.S., volume also surged in Europe and Asia.
A benchmark of institutional appetite to move quickly in the volatile markets, looking for buyers of big blocks: Liquidnet's average volume was up 50 percent in the United States, compared to 30 percent for markets as a whole.
With a half hour to go, the New York Stock Exchange was reporting 6,845,245,875 shares traded on Wednesday, theNasdaq Stock Market 2,703,099,197 and NYSE Amex 141,449,974.
Liquidnet said it believed the activity was due to institutions wanting to move 10,000, 100,000 and 1 million share blocks, pick their spots when doing it and avoid slicing up and managing the sale of holdings in 300-share slices, as preferred by high-speed trading firms.
"As institutional investors look to realign their portfolios in reaction to crisis-like conditions and global uncertainty, they are flocking to the safety of the size discovery offered by Liquidnet," said Brian Williamson, Senior US Equities Analyst at Liquidnet. "While we are all concerned about the macro economic conditions that are affecting the world's markets, our responsibility is to provide a safe and efficient market for our Members around the world to be able to execute their strategies and that is what we are doing."
In July. Liquidnet said its average daily trading volume was $58.8 million. In June, $49.5 million.