Kevin Tyrell, Head of Equities Strategy and Research, NYSE
While most people know that the NYSE Closing Auction is the single largest liquidity event in the U.S. market, accounting for more than 6% of NYSE-listed volume on a regular basis, fewer are aware of the additional auction liquidity available at nearby price points.
To highlight this effect, we show the cumulative additional liquidity available on various days in December for NYSE-listed Russell 2000 and S&P 500 stocks, with colors indicating the distance of the liquidity from the final closing price. The median spread for NYSE-listed Russell 2000 stocks is roughly 29 bps, meaning all additional liquidity represented in green and blue on the Russell chart are on average within 2 spreads of the final closing price. The chart shows that traders who seek out this liquidity, by leveraging a floor broker’s experience and capabilities or by submitting orders at various price points, can find material additional volume.
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.