Insights & Commentary

Market Structure

Volume and Liquidity Update

Jan 23 2017

Desk commentary by Jennifer Hadiaris

A look at trends going into 2017 – and the reasons why volume and liquidity are no longer the same thing

In this note

  • Volumes improve in 2016… but are off to a slower start in 2017.
  • 2016 growth in ETF volumes outstrips the growth in single stocks.
  • Parsing out liquidity from volume – we estimate only 35% of total volume is non-HFT single stock trading.
  • Exchange volumes remain fragmented, despite mergers, acquisitions and newcomers.
  • Regulatory landscape has led to some shifts in dark pool volumes.

Volumes improve in 2016… but are off to a slower start in 2017

US Equities Average Daily Volumes: 1998 – 2016

In 2016, volumes continued their steady climb from the lows of 2013. The final average of 7.3 billion shares daily volume, however, did not reflect some of the wide swings throughout the year (see below). We started off 2016 with high volatility and very high volumes (over 9 billion shares ADV in both January and February), and volumes stabilized mostly between 6 and 7 billion from there.

In comparison to the strong start to 2016, 2017 (albeit only 12 days of trading so far) has been relatively slow. This month, daily volumes have averaged 6.73 b shares, down 28% from 9.31 b shares in January 2016 (see below). Notional volumes are down 25% from January of last year.

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