Our previous post highlighted how end investors could potentially bear increased costs as a result of the SEC's proposed Transaction Fee Pilot. As we expected, the post triggered a significant amount of public debate, as well as discussion between the Exchange and members of the buy and sell-side. This is an important topic worthy of discussion.
This follow-up post provides additional detail of our original calculations. We have also prepared a sensitivity analysis highlighting that substantial costs would remain for investors even if our reasonable assumptions prove, in practice, to be either too aggressive or conservative. Finally, in the interest of inviting parties to reach their own conclusions, we have created an interactive model that enables readers to input their own assumptions related to venue and liquidity type distributions. By providing their own data, readers can see the resulting estimated impact.
As noted in our introduction, we are providing a spreadsheet that enables users to input their own assumptions so they can arrive at an estimated annual impact from their firm's own data. The model includes a robust set of venue and liquidity action variables, enabling users to customize volume mixes for variables such as add/take, standard/inverted/dark venues, etc. We also include a Yes/No variable for cost-plus or pass-through pricing models. Many of the questions generated by our initial post related to volume and activity assumptions, and we expect that this model will enable readers to review their own activity distribution and see the resulting impact estimate.
We consider the substantial debate around our original post a welcome outcome. We achieved our goal of encouraging discussion of the possible impacts of the SEC's proposed Transaction Fee Pilot. We hope that future commentators will attempt to include substantive and quantifiable data in support of their stance, as we have tried to do here. We welcome feedback and continue to believe that the proposal will result in increased costs to investors due to wider spreads. We agree with the general view of many who have commented that no one can precisely predict the future and that several assumptions are required to model the possible results of the pilot. In our view, we believe that costs for end investors to take liquidity will rise.
Following the record-setting 40.1 million average daily volume (ADV) in the 1st quarter of this year, Q2 2021 options volume was the 2nd highest of all-time with 37.6 million contracts traded per day. Robust volume was driven in part by market anticipation of a potential earlier rise in interest rates and Fed tapering, as well as increased volume in options on new issues and continued activity in retail-focused stocks.
After-hours trading has been a larger piece of the total trading volume since the onset of the pandemic, with retail presence growing stronger and earnings announcements becoming less of a factor. In this post, we examine the impact of these shifting dynamics on after-hours price discovery and order behavior.
The surge in market volatility and trading volumes since the onset of the pandemic in March 2020 has impacted numerous aspects of equity market trading. One less-studied area has been after-hours trading. After-hours has also seen changes in order flow trends and influences, and here we examine trends and shifts occurring in these sessions.