Maybe Robert was right and there's no conspiracy after all.
May 09, 2019
Liquidity Matters: Amid Equity Market Melt Up, Dark Pools Continue to Slip
Larry Tabb
TABB Group
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A declining VIX framed the US equity market in April 2019, as lower trading volumes followed lower volatility. As trading volumes drifted down, Trade Reporting Facilities increased their market share month over month, while ATSs continued to lose trading volume and Citi shuttered its CitiCross dark pool.
The lackluster US equity market continued to melt up in April as the S&P 500 appreciated 3.4% throughout the month, while the VIX drifted down 2.5%, to end the month at approximately 13.12%. This framed the US equity market in April 2019, as lower trading volumes followed lower volatility. US equity ADV during the month dropped 12%, from approximately 7.5 billion shares in March to 6.6 billion in April.
As trading volumes drifted down, Trade Reporting Facilities (TRF) increased their market share month over month, from 36.4% of total equity trading to 38.7% of shares traded, though total TRF volume was down 6% month over month. This is the fifth highest TRF volume market share on record, following an April 2010 high of 39.58% and 39.56% in January 2018.
While the TRF market share numbers accelerated in April, the split between OTC and ATS trading has shifted. Over the past two years, the percentage of flow traded in ATSs has dropped almost 3%, from approximately 14% to 11% of total flow. This has occurred while TRF volumes have remained fairly stable, at approximately 38% of total shares traded (
see Exhibit 1,
below).
On the exchange side, Cboe continues to lose market share. Cboe consolidated market share has drifted down from approximately 20% of total shares matched in early 2018, to 15.4% of flow in April 2019, while the NYSE platforms during the same period increased market share, from 22.5% to 24.2% of shares traded, and Nasdaq’s market share remained fairly constant, at approximately 19% (
see Exhibit 2, below).
Though the ATS market lost approximately 3% overall market share, the players have remained stable, with UBS and Credit Suisse consistently maintaining the No. 1 and No. 2 places. While Credit Suisse has maintained a 10% ATS market share from early 2018, however, UBS has lost approximately 2% of its ATS market share during this same period (
see Exhibit 3, below).
Two interesting ATS trends have developed over the past few months. The first has been the accelerating growth of Intelligent Cross, one of the newest ATSs. Intelligent Cross, which launched in July 2018, now has approximately 0.7% of ATS market share. Conversely, Instinet Crossing (ICBX) is hemorrhaging market share, dropping from about 3% of ATS activity in early 2018 to 1.6% in April 2019 (
see Exhibit 4, below).
The other big ATS news this month was Citi’s announcement that it shuttered the CitiCross dark pool in April. CitiCross was the larger of Citi’s two remaining SDP/ATSs. Citi has, over the past four years, shuttered its single-dealer portal, CitiMatch, in April, 2015; CitiIOI in April 2018; and now CitiCross in April 2019. This leaves CitiBlock as its only remaining ATS.
