Knight Trading Reports July Average Daily Share Volume Lowest Since April 2009
For a firm which describes itself as "the leading
source of off-exchange liquidity in U.S. equities and [has] greater share volume than any U.S. exchange" , "share volume", as one can surmise, is the lifeblood of the firm. And should there be a dramatic drop in "share volume" it means that both revenue, as well as the general volume of other exchanges must be very low, since Knight is presumably a good proxy of trends elsewhere. Which is why when we pulled up Knight's recent trading volume we were rather surprised by the dramatic plunge in stock trading over the past 4 months. After hitting a near record in April of just under 16 billion daily average shares, volume has since plunged to 7.4 billion, or the lowest since last April, when it was a mere 5.9 billion. And no, this is not merely the seasonal summer slowdown: last July Knight did an average of 10.2 billion shares, thus July 2010 was a 27% decline in share volume. But one doesn't need to look far to confirm this: a casual glimpse at the NYSE daily volume, or the ridiculous moves in stocks on vapor trading when a block of SPOOs can move the bid ask by a quarter of a dollar, are sufficient to demonstrate just how fragmented the market has become. This merely reinforces our observations that in addition to pulling capital out of equity mutual funds, retail investors and increasingly institutional ones, simply refuse to trade. Luckily our message that the market is (at least for the time being) broken has finally been heard far and wide. And to all those who think that based on a series of lucky coin tosses, they can outwit an irrational and chaotic system, we wish them all the best.