Exchange Highlights: Notional Value Traded Ebbs in a Summer Slowdown

Observations in Low-Priced and High-Priced Stocks

Highlights & Recent Developments

  • MEMX exchange market share excluding TRF volume was 5.9% in July 2022, up from 5.1% in July 2021
  • MEMX ranked third in average time at the NBBO (liquidity) and NBBO setting (price discovery) in July
  • Industry notional value traded in July was at its lowest level in 12 months
  • TRF market share was nearly 44% in July, including high sub-dollar activity (10% of volume)
  • MEMX offers attractive make/take pricing in sub-dollar stocks, including a liquidity-adding rebate of 10 basis points and take fee of 25 basis points.
  • Recent stock splits in high-priced stocks highlight the benefits of round-lot reform

Market Share

Chart 1 shows MEMX market share in several different ways. Excluding auctions and TRF provides the most accurate picture of the primary segment against which MEMX directly competes. TRF market share was high in July at 43.9%. MEMX exchange market share excluding TRF volume was 5.9% in July 2022, up from 5.1% in June 2021.

Volume & Diversity of Liquidity

Looking at notional value traded provides the clearest picture of overall market conditions. The summer slowdown is in full swing, with $462 billion industry notional value traded in July 2022, which is down 10% year-over-year and at its lowest level in twelve months.

Consolidated average daily volume was 10.5 billion shares in July 2022; excluding sub-dollar volume, it was 9.5 billion shares.

Sub-dollar trading accounted for 10.2% of industry share volume in July, well above industry norms, which contributed to higher TRF market share of nearly 44%. Given the high level of retail trading in sub-dollar stocks, the amount of off-exchange trading is very high in this segment, including 65% TRF market share in sub-dollar stocks in July.

Chart 5 shows that four of the top 20 most active stocks in July were trading around or below $1. These stocks accounted for 3.95% of industry share volume but only 0.03% of notional value traded. XELA was the most active stock, accounting for 2.45% of industry share volume, including 973 million shares traded in a single day.

Observations on Recent Stock Splits

Recent stock splits in several blue chip stocks highlight the benefits of round-lot reform. There were three significant 20-to-1 stock splits (GOOG, GOOGL, AMZN). In each of these stocks, the average trade size increased from ~20 shares to ~100 shares and spreads declined significantly, as shown in the charts below. Quoted spreads (bps) declined ~75% and effective spreads declined ~60%, on average.