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Firms making money by supplying market centers with pools of shares went dark last week, down by half from averages, despite a 27% increase in total comparable volume in our statistical set. We also saw order flow double at wholesale desks, which help other broker-dealers find liquidity to meet demand.
IROs, what's it mean? Liquidity providers weren't needed because shares were coming into the market without rotating efficiently from buyers to sellers. Sure, every seller needs a buyer. But order flow doubling at wholesalers says broker-dealers are doing more buying rather than simply moving shares to investors. Sometimes it means sellers themselves are taking shares back that don't find buyers at good prices (this happens in the book depth on all order-matching platforms, whether Sotheby's for art, the Malheur County cattle sale yard in Oregon, or at Wall Street market centers). Bottom line, not many investors were out shopping.
Two conclusions: Macroeconomically, this could further harm the financial results of broker-dealers, who've had to commit capital. And in IR terms, it means you should be highly selective about the institutions on your IR outreach calendar, because only the metaphorical Apaches will be out raiding.
Let's shift gears for the space remaining. If you missed it, the Wall Street Journal noted today that with NYSE specialists Susquehanna International Group and Van der Moolen shuttering, the Nasdaq is stepping up its effort to lure public companies over. Both specialists will continue with other financial-markets endeavors, but still, two of the seven NYSE specialist shops are gone—almost one year to the month from the NYSE's move to a hybrid environment.
And how is the Nasdaq planning to target listed firms formerly tied to these specialists? By helping them talk to traders at major market-making firms. "The broker-dealers have been trading their stocks since the beginning of time and understand them," said Chris Concannon, head of Nasdaq Transaction Services.
Huh. Imagine that. Wish we'd thought of—oh wait, we did think of that. Five years ago. Humor aside, we're happy to see the Nasdaq press the competitive battle. And NYSE listed folks, if you need help seeing what's going on, you just let us know, now.
We wish you all both thankfulness and tryptophan euphoria this Thanksgiving season.
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