Does it seem as surreal to you as it does me that we should be a quarter finished with 2008 already? Amidst mutters of "and thank goodness for that" let's grab a couple lessons here on April Fool's Day.
First, that March Madness concludes in April now is no reason to think the globe has tilted a-kilter. It's been that way awhile. And second, the desire to draw some tidbit of global equity-markets goodness from how the four top men's basketball seeds each chewed their way to the regional finals does not mean that any such morsel exists.
But this does have meaning: trading the last week of the quarter showed light volumes—down almost 40% from weekly levels in January and February—driven by automated trading. That in turn indicates how, having reached the end of a quarter, investors weren't crashing the exits. They weren't exactly scanning plowed fields for unearthed gems, either. They were just…auto-piloting.
Investor relations folks, what lessons here? First, broad equity-markets structure tells you to be choosy about targeting new investors. Why? Most of the money deployed presently is managed for risk and unavailable for opportunism. It's not running off in search of a hole in the ground, but it's sure not perched atop the t-ball stand either. So think big-picture. Concentrate on existing holders rather than news ones. Set management expectations low for news and other potential catalysts. Because for every share long right now, there's probably an offsetting index or ETF put. We're just hoping to help you keep things both real and efficient.
One more thing, dark pools have been busier. Dark pools, or crossing platforms, are trading systems that allow investors and traders to meet behind the public order books and match up buying and selling interest without violating the rules of the markets. They're not new, really, just cleverer under Regulation National Market System where traders can't continue working orders at the same price if a better one is nationally available.
Who uses them? Technically anybody can, but they're popular with investors working value leads and with arbitragers working short-term strategies and needing more efficient entry and departure than what comes in advertised order books.
What's the lesson, IR folks? That even smart money is thinking in tight timeframes. So, if you exert the same effort on building relationships with big investors that you did when market structure was more conducive to sustained buyside commitment, don't be frustrated if you reap little fruit. Don't stop. Just be picky with your outreach time. It's the old "work smarter, not just harder" notion.
Margaret E. Wyrwas - Knight Capital Group, Inc. (Nasdaq: NITE)
Senior Managing Director, Corporate Communications & Investor Relations
Equity Analysis™ subscriber since March 2007
"In global markets driven by automation, changing market structure regulation and dynamic investment objectives, today's investor relations professionals require new data points in order to remain relevant and add value in their company's quest to reduce its cost of capital."
