Weeden Market Structure Fact Book

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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

1 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. Merrill Lynch admitted to misleading brokerage customers about which firms processed their trades and agreed to pay a $42 Million fine. Coinbase announced the creation of Coinbase Custody, which aims to secure the institutional crypto market, by providing cold storage options for their customers. U.S. volumes were up +10.4% in June, supported primarily by both S&P s June quarterly rebalance as well as Russell s annual index reconstitution. The S&P 500 fell 20 bps as the VIX Index rallied +7.7%. 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 June 2018 Strategy Breakdown Strategy June '18 June '17 CloseIQ 8.6% 7.9% POV 8.9% 2. TWAP 7.6% 5. VWAP 42.2% 49.4% Custom Bullseye 2.6% 1.7% Capture 5.1% 6.8% Ghost 4.1% 17.3% OnePipe 19.4% 7.6% VWAP, 42.2% TWAP, 7.6% Bullseye, 2.6% Capture, 5.1% CloseIQ, 8.6% Custom, 1. Ghost, 4.1% OnePipe, 19.4% POV, 8.9% Correlations and Volumes ETF Volumes Flat MOM in June % 17% 18% 17% 16% 16% 18% 19% 23% % 18% Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June US Implied Correlations and Volatility End of June U.S. Market Volumes ICJ Index VIX Index 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Feb-17 Mar-17 Apr-17 Jun-17 Jul-17 Sep-17 Oct-17 Nov-17 Jan-18 Feb-18 Apr-18 May 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 Rises MOM in June (June excl. Russell Recon) Venue Breakdown - June 2018 TRFs 36.08% BATs BZX 6.13% Boston 3.01% ARCA 8.57% NYSE 14.52% BATs BYX 4.83% NASDAQ 15.94% IEX 2.39% Edge A 1.2 Edge X 5.6 NYSE American 0.48% PSX 0.69% CHX 0.52% U.S. IPO Executions $12 $10 U.S. IPO Executions ($Bn) $9.72 $8 $6.57 $7.00 $6 $4 $2 $3.60 $0.95 $0.79 $2.40 $3.56 $1.34 $1.40 $4.81 $3.03 $4.87 $0 Jun'17 Jul'17 Aug'17 Sep'17 Oct'17 Nov'17 Dec' 17 Jan' 18 Feb' 18 Mar'18 Apr'18 May'18 Jun '18 Equity Fund Flows Domestic Equity Funds Experienced ~$19.5Bn of Outflows, Intl Funds Experienced Outflows of ~$11.4Bn- June Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 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) 2 2 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 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 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) 2 2 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% 2 12% 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% 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 9% 8% 7% 6% 4% 3% 2% 1% NASDAQ NYSE 12% Average Close Size as % of Daily Volume by Market Cap 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 BofA s Merrill Admits Misleading Customers, to Pay $42 million SEC Fine Merril Lynch admitted to misleading brokerage customers about which firms processed their trades and agreed to pay a $42 Million fine. The SEC said that Merrill engaged in a scheme known as masking, which includes the alteration of trade confirmations, with the goal of deceiving customers into thinking that the trades were processed in-house, making trading services appear more active and sophisticated. Merrill was also accused of concealing from customers the possibility that high-frequency traders who traded in Instinct X, might be counterparties. NYSE Comes Out Swinging in SEC Pricing Test, Pitting Itself Against Major Pensions and Fund Managers NYSE vs. SEC Pricing Test : The SEC is planning to run a pilot test to evaluate how the market is affected rebates and transaction fees that draw orders from brokers. The SEC, supported by pension funds and large asset managers, assert that firms are motivated to route orders to specific exchanges that have a higher rebate/lower transaction fee. The SEC wants to ensure brokers are focused on executing through an exchange focused on best execution as opposed to mitigating their operating costs. The NYSE and brokers argue that the SEC is undermining a multi-billion dollar industry which will have negative ramifications for the market. SEC Looks to Modernize Regulatory Framework for ETFs A proposal has been put forward by the SEC with the goal of reducing the costs and complexities of bringing new ETF products to market. The new proposal will have ETFs operate under the Investment Company Act of 1940, removing the need to gain exempted relief from regulators before launching new products. The new rule would also permit ETFs to use custom baskets under the creation/redemption process. The development of ETFs has given investors options that can more effectively meet their goals. We should embrace such innovation and ensure that our regulatory framework allows for it, while being unwaveringly true to our investor protection mission, said SEC Chairman, Jay Clayton. Exchange Operator IEX Blasts NYSE for Criticism of SEC Fee Plan In June, the New York Stock Exchange noted a plan by regulators that will test lowering exchange fees and rebates would cost investors at least $1 Billion. The SEC in March said it planned to test the effects of lowering stock exchange fees and rebates, following widespread criticism of the current pricing system. Many critics argue that the current system creates conflicts by giving brokers incentives to send customer orders to exchanges that pay the biggest rebate, even when better execution may be found else where. NYSE has attempted to garner support from Main Street by purposely misleading companies with a false narrative of investor and issuer harm, IEX said in a letter to the U.S. Securities and Exchange Commission on June 27th. Institutional Crypto Space Develops as Coinbase Launches Custody Service Coinbase announced the creation of Coinbase Custody, which aims to secure the institutional market, by providing cold storage options for their customers. Bloomberg reported that Coinbase has already accepted deposits from ten hedge funds and family offices, all within the first week of operation. Coinbase has stated that they are hoping to take on 100 institutional clients managing over $5 Billion in crypto assets come January. Coinbase Custody will only be accepting investors with a minimum balance of $10 Million and will charge a 0.1% monthly fee, as well as $100,000 setup fee. 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 November 2018 Updates It was a volatile month in the energy markets as crude was down over 2 while natural gas was up over 4; the energy sector was down ~2%. The Russell