New Market Share Records and Alphabet Stock Split Insights
Highlights & Recent Developments
- MEMX hit a new total market share record of 4.3% in February, including 4.74% on February 25th
- ETP market share also reached a new record of 5.6% in February
- MEMX had a new average daily volume record of 827 million shares and $35.7 billion in notional value on February 24th
- A recently-announced stock split highlights the need to accelerate round lot reform—MEMX has advocated for an accelerated timeline for implementing round lot reform as part of the SEC’s infrastructure rule
MEMX reached a new total market share record of 4.3% in February, including 4.74% on February 25th. ETP market share also climbed to a new record of 5.6% in February. ETP volume remained strong, accounting for 23% of industry share volume in February 2022, up from 12% in February 2021.
Volume & Diversity of Liquidity
Consolidated average daily volume remained high in February at over 12 billion shares. On February 24th, MEMX hit a new average daily volume record of 827 million shares and $35.7 billion in notional value.
Market Structure – Round Lot Reform and the Alphabet Stock Split
Last year, MEMX recommended amending the implementation timeline for round lot reform pursuant to the infrastructure rule so that uncontroversial round lot changes could be made ahead of the implementation of content changes and introduction of competing consolidators. MEMX also recommends making all odd lot quote data available on the consolidated data feed at no additional cost.
While the industry awaits the implementation of round lot reform, issuers of higher-priced securities can also solve the round lot problem themselves by splitting their stocks to lower “optimal” price levels. For example, Alphabet recently announced a 20-for-1 stock split in GOOG and GOOGL. Effective in July, the stock split is apparently designed to make Alphabet stock more accessible for investors. It may also have an impact on market microstructure by eliminating inefficiencies caused by lot constraints.
Looking at the table below, GOOG and GOOGL have much wider quoted and effective spreads (in basis points) than other non-constrained stocks trading at similar notional value levels. This is likely due to Google’s high stock price and significant odd lot quoting at share sizes of less than a round lot (100 shares), which is used to establish the NBBO. Alphabet’s stock split could meaningfully narrow quoted and effective spreads in GOOG and GOOGL and reduce investor trading costs. Notwithstanding Alphabet’s upcoming split, systematic reform is needed in an environment where many issuers avoid such splits.