Record Notional Traded and Overnight Volume Growth in Equities; Options Rank High in ADV and Market Share

Record Notional Traded and Overnight Volume Growth in Equities; Options Rank High in ADV and Market Share

Equities Exchange Highlights

MEMX Equities average daily volume reached $17.9 billion in October and $17.3 billion in November, with active retail trading contributing to the growth. In November, MEMX notional volume was up 82% year-over-year.

Overnight trading volume (8:00 p.m. to 4:00 a.m.) increased 137% month-over-month to 106.4 million shares. The growth largely occurred on the Blue Ocean ATS, where 18 South Korean firms resumed trading. Sub-$1 activity accounted for over 30% of volume, and there was also significant activity in NVDA, TSLA, QQQ and SPY. Trading during this overnight period still only accounted for 0.5% of industry volume, compared to 5.2% of volume from pre-market (4:00 a.m. to 9:30 a.m.) and 8.9% from post-market (4:00 p.m. to 8:00 p.m.).

Smaller round-lot sizes in stocks priced over $250 went into effect in November. This included 236 stocks where the round-lot size changed from 100 shares to 40 shares and 13 stocks where the round-lot size changed from 100 shares to 10 shares. Lowering the round-lot size allows for more quotes to be included in the NBBO calculation to narrower quoted spreads.

We examined NFLX, which had a round-lot size change (100 shares to 10 shares) on November 3rd and then had a 10-for-1 stock split on November 17th to a price of ~$110. The stock split presents a unique situation where the stock is priced well below $250, but it also maintains a smaller round lot size of 10 shares (rather than 100 shares for most stocks priced below $250). These combined changes in NFLX resulted in an 82% reduction in its average quoted spreads in basis points and 88% reduction in average notional size at NBBO from October to December.

Figures 4 and 5 highlight the key findings in the NFLX daily trends.

• The percent of odd-lot trades fell from ~94% in October to ~66% following the round-lot change, then declined further to ~35% after the stock split.
• The average NBBO spread narrowed from ~8 bps to ~4 bps following the round-lot change, then declined further to ~1.5 bps after the stock split.
• The average notional size at NBBO declined from ~$300K to ~$90K following the round-lot change, then declined further to ~$35K after the stock split

Options Exchange Highlights

Activity on MEMX Options remained strong in November, with average daily volume traded of 2.78 million contracts, including five days trading over 3 million contracts.

MEMX Options regular-electronic market share rose to 7.8% (ranking second) in Penny issues and 12.5% (ranking first) in Non-Penny issues.

High market share coincided with strong quote performance, where MEMX Options ranked second in Penny issues and first in Non-Penny issues. Figure 8 shows MEMX’s diverse mix of liquidity adding volume, which included 47% from customers and 47% from market makers in November.