Weeden Market Structure Fact Book

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Weeden Market Structure Fact Book May 2018 Updates The Federal Reserve proposed in May easing the original Volcker rule set forth during the financial crisis. The proposal, known as Volcker 2.

1 Weeden Market Structure Fact Book May 2018 Updates The Federal Reserve proposed in May easing the original Volcker rule set forth during the financial crisis. The proposal, known as Volcker 2.0, would curb audits on individual securities and derivatives transactions. Traders would be allowed much more freedom for buying and selling securities. Stacey Cunningham made her debut as the President of the New York Stock Exchange, making her the first female president in the exchange s 226 year history. IEX promoted its Head of Listings, Sara Furber to Chief Financial Officer. The S&P rallied +2.4% in May as trade war chatter subsided. U.S. markets averaged 6.6 billion shares traded per day during the month of May. MSCI conducted their quarterly rebalance on May 31st, providing markets with a slight up-tick in liquidity. This publication is prepared by Weeden & Co.'s trading department. Weeden & Co. does not produce research, nor does it have a research department. This publication is for information purposes only and is based on information and data from sources considered to be reliable, but it is not guaranteed as to accuracy and does not purport to be complete and are subject to change without notice. This publication is neither intended nor should be considered as an offer or the solicitation of an offer to sell or buy any security or other financial product. Nothing contained herein is intended to be, nor shall it be construed as, investment advice. Information contained herein provides insufficient information upon which to base an investment decision. Any comments or statements made herein do not necessarily reflect those of Weeden & Co. LP or its affiliates Weeden & Co. LP. Sources: Weeden, Bloomberg, S&P, Russell, Finra, BATS Weeden Program Trading Group 2018 Weeden & Co. LP 1

2 Table of Contents Self-Traded Strategy Usage... 3 Correlations and Volumes Venue Market Share Statistics... 4 U.S. IPO Executions... 4 Equity Fund Flows... 4 ATS Market Share Statistics Non-ATS Market Share Statistics... 7 Market-On-Open Statistics... 8 Market-On-Close Statistics... 9 Market Structure Highlights Contacts Important Upcoming Dates January 3, 2018 MiFID II to begin. Early 2018 Nasdaq plans to begin trading Bitcoin futures March 2018 ESMA to publish Double Volume Cap Data March 18, SIFMA Compliance and Legal Annual Seminar in Florida April 18, 2018 Equity Market Structure Conference in New York May 15, 2018 Consolidated Audit trail publishes specifications for submission of customer information May 21-23, 2018 FINRA s 2018 Annual Conference in Washington, DC. October 1, 2018 SIFMA annual meeting between policymakers, regulators and market experts October 3, 2018 Tick Size Pilot program ends November 15, 2018 Large broker-dealers required to report to CAT November 15, 2019 Small broker dealers must begin reporting to CAT Weeden Program Trading Group 2018 Weeden & Co. LP 2

3 CBOE Vol & Correlation % of Total Volume Self-Traded Strategy Usage Benchmark Strategies Liquidity Seeking May 2018 Strategy Breakdown Strategy May '18 May '17 CloseIQ 8.9% 3.2% POV 5.9% 3.3% TWAP 6.4% 8.3% VWAP 47.2% 61.7% Custom % Bullseye 2.6% 2. Capture 7.2% 4.7% Ghost 3.4% 7.9% OnePipe 17.8% 8.4% VWAP, 47.2% Bullseye, 2.6% Capture, 7.2% CloseIQ, 8.9% Custom, 0. Ghost, 3.4% OnePipe, 17.8% POV, 5.9% TWAP, 6.4% Correlations and Volumes ETF Volumes Fall MOM in May % 18% 17% 18% 17% 16% 16% 18% 19% 23% % 1 1 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May US Implied Correlations and Volatility End of May U.S. Market Volumes ICJ Index VIX Index 14,000 12,000 10,000 8,000 6,000 4,000 2, Feb-17 Mar-17 Apr-17 Jun-17 Jul-17 Sep-17 Oct-17 Nov-17 Jan-18 Feb-18 Apr-18 May-18 Weeden Program Trading Group 2018 Weeden & Co. LP 3

4 Flow in Billions Notional Value ($Bn) $Bln (USD) 2018 Venue Market Share Statistics Avg. Daily Notional Turnover Falls MOM in May (June excl. Russell Recon) Venue Breakdown - May 2018 TRFs 37.09% BATs BZX 6.21% Boston 3.18% ARCA 8.82% NYSE 13.08% IEX 2.47% NASDAQ 14.88% BATs BYX 4.86% NYSE American 0.33% PSX 0.73% CHX Edge A 0.51% 1.3 Edge X 6.54% U.S. IPO Executions $12 $10 U.S. IPO Executions ($Bn) $9.72 $8 $6.57 $7.00 $6 $4 $2 $3.50 $3.60 $0.95 $0.79 $2.40 $3.56 $1.34 $1.40 $4.81 $3.03 $0 May'17 Jun'17 Jul'17 Aug'17 Sep'17 Oct'17 Nov'17 Dec' 17 Jan' 18 Feb' 18 Mar'18 Apr'18 May'18 Equity Fund Flows Domestic Equity Funds Experienced ~$19.4Bn of Inflows, Intl Funds Experienced Inflows of ~$45M- May May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Domestic Intl Weeden Program Trading Group 2018 Weeden & Co. LP 4

5 Percent of Tier1 Flow ATS Market Share Statistics 3 ATS Tier 1 Market Share (Total Tier 1 volume as denominator) AQUA BIDS BLKX CBLC CROS CXCX DBAX DLTA EBXL IATS ICBX ITGP JPMX KCGM LATS LMNX LQNA LQNT MLIX MSPL MSRP MSTX PDQX UBSA USTK WDNX XIST XSTM SGMT JPBX CIOI PROS ATS Tier 1 Total Market Share (Total U.S. Market Volumes as denominator) AQUA BIDS BLKX CBLC CROS CXCX DBAX DLTA EBXL IATS ICBX ITGP JPMX KCGM LATS LMNX LQNA LQNT MLIX MSPL MSRP MSTX PDQX UBSA USTK WDNX XIST XSTM SGMT JPBX CIOI PROS Weeden Program Trading Group 2018 Weeden & Co. LP 5

6 ATS Market Share Statistics 3 ATS Tier 2 Market Share (Total ATS Tier 2 volume as denominator) AQUA BIDS BLKX CBLC CROS CXCX DBAX EBXL IATS ICBX ITGP JPMX KCGM LATS LMNX LQNA LQNT MLIX MSPL MSRP MSTX PDQX UBSA USTK WDNX XIST XSTM SGMT JPBX CIOI 1.4 ATS Tier 2 Total Market Share (Total U.S. Market Volumes as denominator) AQUA BIDS BLKX CBLC CROS CXCX DBAX EBXL IATS ICBX ITGP JPMX KCGM LATS LMNX LQNA LQNT MLIX MSPL MSRP MSTX PDQX UBSA USTK WDNX XIST XSTM SGMT JPBX CIOI Weeden Program Trading Group 2018 Weeden & Co. LP 6

7 Non-ATS Market Share Statistics Non-ATS OTC Tier 1 Mkt Share: Top BDs (Total Tier 1 Non-ATS OTC Volume in Denominator) 2 23% 24% % 12% 1 9% 6% 4% 3% 2% 2% CITADEL SECURITIES VIRTU AMERICAS GOLDMAN SACHS & CO. G1 EXECUTION SERVICES, MORGAN STANLEY & CO. TWO SIGMA SECURITIES, UBS SECURITIES CITIGROUP GLOBAL MARKETS INC. BARCLAYS CAPITAL INC. Other (includes De Minimis) 3 33% Non-ATS OTC Tier 2 Mkt Share: Top BDs (Total Tier 2 Non-ATS OTC Volume in Denominator) % 16% 1 6% 3% 4% 3% 1% 1% CITADEL SECURITIES VIRTU AMERICAS G1 EXECUTION SERVICES, TWO SIGMA SECURITIES, UBS SECURITIES GOLDMAN SACHS & CO. MORGAN STANLEY & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED CITIGROUP GLOBAL MARKETS INC. Other (includes De Minimis) Weeden Program Trading Group 2018 Weeden & Co. LP 7

8 Market-On-Open Statistics Average Open Size as % of Daily Volume by Venue 1.8% 1.6% 1.4% 1.2% % 0.6% 0.4% 0.2% NASDAQ NYSE % 1.6% 1.4% 1.2% % 0.6% 0.4% 0.2% Average Open Size as % of Daily Volume by Market Cap S&P 500 S&P 400 S&P 600 Weeden Program Trading Group 2018 Weeden & Co. LP 8

9 Market-On-Close Statistics Average Close Size as % of Daily Volume by Venue 1 9% 8% 7% 6% 4% 3% 2% 1% NASDAQ NYSE 12% Average Close Size as % of Daily Volume by Market Cap 1 8% 6% 4% 2% S&P 500 S&P 400 S&P 600 Weeden Program Trading Group 2018 Weeden & Co. LP 9

10 Market Structure Highlights NYSE Names First Woman Chief in Exchange s 226 Year History Stacey Cunningham made her debut as the President of the New York Stock Exchange. Cunningham has replaced Tom Farley, who has left the company to work for Dan Loeb s Far Point, according to a spokesman. Now two of the three U.S. stock exchange operators are led by woman. U.S. ETF Providers Cry Foul over SEC s Fee Experiment The U.S. Securities and Exchange Commission is preparing to roll out a one to two year pilot program to test whether the way stock exchanges charge fees and pay out rebates prompts the way brokers send orders. The plan will group most stocks and exchangetraded products (ETPs), into four categories, each with different pricing schemes. Under the pilot program, some stocks and ETFs will trade as they do today (30 cent per 100 share maximum exchange execution fee). Other securities in the pilot will have a 15 cent per 100 shares or 5 cent per 100 share fee limit. Eric Pillackov, global head of ETF capital markets at Invesco s PowerShares said, We are against the inclusion of ETPs in the actual pilot...the playing field needs to be level when it comes to ETFs. Traders Not Convinced of Shift to Lit Markets Under MiFID II Just one in four traders are confident that dark liquidity will shift to lit markets under MiFID II, according to a survey carried out by SIX Group. The survey of traders in equities, fixed income, structured products and ETFs suggests that traders are divided as to where dark liquidity on capped stocks will migrate to instead of lit markets. 3 of respondents said it will migrate to block trading venues, while 23% said systematic internalisers (Sis) and 2 predicted periodic auctions. This variance in responses highlights the reigning uncertainty among traders..over time, market developments will provide more conclusive answers on the success of MiFID II, commented Tony Shaw, director of the London office for securities and exchanges at SIX. Goldman Sachs says Computerized Trading May Make Next Flash Crash Worse Goldman Sachs is cautioning its clients that computerized trading may exacerbate the levels of volatility of the next big market selloff. One theory that has been proposed for why market fragility could be higher today is that because HFTs supply liquidity without taking into account fundamental information, they are forced to withdraw liquidity during periods of market stress to avoid being adversely selected, commented Charles Himmelberg, co-head of global market research at Goldman Sachs. IEX Promotes Listing Head to Chief Financial Officer The Investors Exchange has promoted its Head of Listings to Chief Financial Officer. Sara Furber joined IEX to head up the listings business in 2016, having held multiple senior roles in investment banking and finance. Fed Backs Easting Volcker Rule Restrictions on Big Banks Trading The Federal Reserve proposed in May easing the original Volcker rule set forth during the financial crisis. The proposal, known as Volcker 2.0, would curb audits on individual securities and derivatives transactions. Traders would be allowed much more freedom for buying and selling securities. Deutsche Bank s U.S. Operations Deemed Troubled by Fed The Federal Reserve has designated Deutsche Bank s US business as being in troubled condition according to the Wall Street Journal. The Fed downgraded Deutsche Bank last year and gave the failing bank a troubled condition status on of the lowest designations given by the Fed. The downgrade has spurred the bank s massive reduction in risk taking across multiple areas including trading and lending. In late May S&P downgraded Deutsche Bank s long-term credit rating too BBB+, from A-, citing Executing risks in a deeper restructuring of the business model than we previously expected. Weeden Program Trading Group 2018 Weeden & Co. LP 10

11 Contacts Bill Lenich Head of Program Trading Program Trading Group 145 Mason Street Greenwich, CT Office: Robert Sicari Event Driven Desk Analyst Program Trading Group 145 Mason Street Greenwich, CT Office: Cash Trading Desk: Program Trading Desk: International Trading Desk: Derivatives Trading Desk: Algorithmic Trading Desk: This publication is prepared by Weeden & Co.'s trading department. Weeden & Co. does not produce research, nor does it have a research department. This publication is for information purposes only and is based on information and data from sources considered to be reliable, but it is not guaranteed as to accuracy and does not purport to be complete and are subject to change without notice. This publication is neither intended nor should be considered as an offer or the solicitation of an offer to sell or buy any security or other financial product. Nothing contained herein is intended to be, nor shall it be construed as, investment advice. Information contained herein provides insufficient information upon which to base an investment decision. Any comments or statements made herein do not necessarily reflect those of Weeden & Co. LP or its affiliates Weeden & Co. LP. Sources: Weeden, Bloomberg, S&P, Russell, Finra, BATS Weeden Program Trading Group 2018 Weeden & Co. LP 11

Weeden Market Structure Fact Book

Weeden Market Structure Fact Book June 2018 Updates The New York Stock Exchange criticized the SEC, claiming the proposed SEC fee plan would be too disruptive and could potentially cost investors $1 Billion.