TABB Equity Digest: Q1-2018

The first quarter of 2018 marked a transition point for the US equity markets. A bout of extreme volatility caused the collapse of the short VIX trade (investors selling volatility) and a tremendous shock not only to the US but to global financial markets. While this volatility rattled investors, it benefited the brokerage industry, as the notional value traded in Q1 hit all-time records – close to $700 billion worth of US equities were turned over on Feb. 6, 2018. Share volume also increased dramatically quarter-over-quarter, with 12.4 million shares traded on Feb. 6, 2018. But that didn’t even breach the top 70 days all-time in terms of share volume traded; the high occurred on Oct. 11, 2008, after the financial crisis, when 19.7 million shares changed hands. This seeming incongruity is due to the change in average share price, which has been consistently rising over the past two decades, from approximately $33 per share to $56.30 on Feb. 6. The first-quarter volatility not only increased trading volumes, it also changed liquidity dynamics across the board, altering the historical balance of lit and dark trading as well as trade size, spreads, and retail execution quality.