• ICE
  • NYSE
  • Contact
  • Insights
  • Login

Market liquidity drivers

October 23, 2020

NYSE recently hosted a Virtual Options Update, which included a review of industry liquidity trends. We highlighted some key themes impacting market volume:

Declining Market Correlations Creating More Varied Risk and Opportunity

  • A large divergence has emerged between the (market-cap weighted) S&P 500 and an equal-weighted version of the index
  • This means getting efficient exposure to better performing stocks in an index may be even more critical to maximize returns

5 Year Return: SPY vs. RSP (Equal Weight S&P 500)

Options Can Help Offer Exposure to High-Priced Stocks

  • As market returns have become more varied, efficient exposure to certain stocks has become more impactful to overall portfolio returns
  • Options can help address this need and we have seen increasing options popularity for some of the highest-price underlying stocks

March - Options ADV Rank vs. Underlying Price Rank

September - Options ADV Rank vs. Underlying Price Rank

Changes in Market Return Patterns Has Contributed to Less Options Volume Concentration

  • We applied the Herfindahl-Hirschmann Index (HHI), a measure of market concentration, to the underlying symbols in the options market
  • Volatility and macroeconomic uncertainty in March led to increased concentration, particularly in broad-market ETFs, while the recent divergence of returns has reduced concentration

2020 Options Symbol Concentration: Herfindahl-Hirschman Index (HHI)

For further information on these trends, and to discuss how NYSE Options can help navigate this market environment, contact [email protected].

Recent Articles

October 23

NYSE Options Update - Market Liquidity Drivers »

NYSE recently hosted a Virtual Options Update, which included a review of industry liquidity trends. We highlighted some key themes impacting market volume.

October 13

Q3 2020 Options Review »

September 2020 set a new record for options industry average daily volume at 30.1 million contracts, which was driven by volatility, a downturn in equities markets after recent new highs and, perhaps, a boost from two high-profile stock splits.

October 6

Opening and Trading Direct Listings »

On Wednesday September 30th the New York Stock Exchange broke new ground by holding two concurrent NYSE Direct Listings — in Asana, Inc. and Palantir Technologies Inc. — along with 4 traditional IPOs, all on one day.

View all Data Insights articles