Q1 2021 Options Review

Data Insights

DMMs Return to the Floor (and to Auctions)

April 27, 2021

The NYSE Trading Floor, like all workplaces, has been affected by the ongoing COVID-19 pandemic. After closing in March 2020, the Trading Floor partially re-opened to Floor Brokers in May 2020 and to Designated Market Makers (DMMs) in mid-June 2020; subsequent NYSE Research analysis highlighted the Floor’s re-opening and associated market quality benefits. In light of public health conditions, Floor capacity was restricted between December 28, 2020 and January 22, 2021, with DMMs operating remotely during this time.

DMMs’ presence on the Floor allows them to manually conduct auctions, adding human judgement to especially complex or challenging price discovery events. DMMs’ return to the Trading Floor on January 25th coincided with an increase in market volume and volatility, resulting in an increase in Limit Up/Limit Down (LULD) halts.

NYSE-Listed Consolidated Volume

Source: NYSE TAQ

LULD halts trigger a 5-minute trading pause, followed by a re-opening auction. LULD events are, by definition, associated with increased market volatility, and the re-opening auction can help establish a reference point as trading resumes. NYSE re-opening auctions after the DMMs returned to the Trading Floor are closer to subsequent market trading, showing the benefit of increased oversight and judgment.

LULD Re-opening Auction Average Dislocation

(% of Daily Trading Range)

Source: NYSE TAQ

“Auction Dislocation” is defined as the difference between the re-opening auction price and the volume-weighted average price (VWAP) observed in the market over the subsequent two minutes. Here we display this measure as a percentage of each stock’s Daily Trading Range, averaged across all NYSE-listed corporate stocks.

Recent Articles

April 7

Q1 2021 Options Review: Volumes Continue to Soar »

After an extraordinary 2020, the pace of trading activity in the options markets accelerated at the start of 2021. Out of the gate, January multi-list options volume averaged a record 42.1 million contracts per day. Prior to 2020 there had never been a single day with options volume of 40+ million contracts.

March 30

Buyers and Sellers Meeting Earlier in the NYSE Opening Auction »

The boost in retail trading activity which began during pandemic lockdowns in spring 2020 continues today. This trend has impacted various market behaviors, including opening auctions.

March 10

NYSE Group Handles Record Message Volume »

Volatility has roared back into the market in March. In contrast to the bleak outlook and dramatic price declines in March 2020, this month has shown decidedly two-way markets with a heavy influence from widely held tech stocks.

View all Data Insights articles