U.S. equity markets closed in on all-time highs this week but market volume was nowhere to be found.
Takeaway: While volume was suppressed this week, futures activity maintains a slight year-over-year advance in 3Q making it the best exchange category
Weekly Activity Wrap Up
Volume was suppressed across the board this week with 3Q16TD average daily volume (ADV) falling for all exchange categories. However, the futures business is maintaining a positive year-over-year growth rate with option and cash equities volumes in retreat. Futures put up 17.1 million contracts per day this week, bringing the 3Q16TD average daily volume (ADV) to 18.8 million contracts, good enough for the only positive year-over-year activity growth rate at +1%. Options activity slumped to 14.6 million contracts per day in the past 5 days, lowering the 3Q16TD ADV to 15.7 million, -13% lower Y/Y. Cash equities came in at 6.1 billion shares per day, bringing the quarter's ADV to 6.6 billion, -10% lower than 3Q15.
U.S. Cash Equity Detail
U.S. cash equities trading came in at 6.1 billion shares per day this week, bringing the 3Q16TD ADV to 6.6 billion, -10% lower than the year-ago quarter. In the market share battle for volume, exchanges are losing share. The New York Stock Exchange/ICE is taking a 24% share of third-quarter volume, which -18 bps lower than the year-ago quarter. NASDAQ is taking a 16% share, -243 bps lower than one year ago. Finally, BATS' 20% share is -121 bps lower Y/Y.
U.S. Options Detail
U.S. options activity came in at a 14.6 million ADV this week, bringing the 3Q16TD ADV to 15.7 million, -13% lower than the year-ago quarter. In the market share battle amongst venues, NYSE/ICE's 15% share of 3Q16 volume is -309 bps lower than one year ago. Additionally, while BATS' share grew in the first half of 2016, growth has stalled somewhat in recent weeks, and the exchange's 11% share is -27 bps lower than the year-ago quarter. Meanwhile, NASDAQ's 22% share is +141 bps higher than in 3Q15, and CBOE's 30% market share of 3Q16 is up +221 bps Y/Y. Finally, ISE/Deutsche's 13% share is -156 bps lower than 3Q15.
U.S. Futures Detail
13.2 million futures contracts per day traded through CME Group this week. That puts the 3Q16TD ADV at 14.6 million, +1% higher Y/Y. Additionally, CME open interest, the most important beacon of forward activity, currently sits at 106.7 million CME contracts pending, good for +17% growth over the 91.3 million pending at the end of 4Q15, although a contraction from the previous week's +21%.
Contracts traded through ICE came in at 3.9 million per day this week, lowering the 3Q16TD ADV to 4.3 million, which is flat Y/Y. ICE open interest this week tallied 64.9 million contracts, +2% higher than the 63.7 million contracts open at the end of 4Q15, although a contraction from the previous week's +3%.
Monthly Historical View
Monthly activity levels give a broader perspective of exchange based trends. As volatility levels, measured by the VIX, MOVE, and FX Vol should rise to normal levels after the drastic compression this cycle, we expect all marketplaces to experience higher activity levels.
Please let us know of any questions,
Jonathan Casteleyn, CFA, CMT
Joshua Steiner, CFA
Patrick Staudt, CFA
Takeaway: Let's Get Ready To Ruuuumble; Boos Cruz; Trump-Nato;
Editor's Note: Below is a brief excerpt from Hedgeye Potomac Chief Political Strategist JT Taylor's Capital Brief sent to institutional clients each morning. For more information on how you can access our institutional research please email firstname.lastname@example.org.
"With me it is exceptionally true that the Presidency is no bed of roses."
-James Knox Polk
Even for a master showman like Donald Trump, last night’s primetime acceptance speech was the biggest test of his life and his campaign, and he did what Donald needed to do. After three days of convention chaos, a very poised and polished Ivanka Trump introduced the softer side of her father and made the strongest appeal of the week to women while portraying her father as a fighter.
The pleasantries stopped there as Trump launched into an hour-long dialogue doubling-down on ideals he’s pushed for over a year, and presented himself as the leader who will bring law and order to a country victimized by corruption, illegal immigrants and terrorism. The night was Trump’s and he closed the convention the way he wanted to close it, leaving no prisoners and highlighting what he’ll do to put America first again.
His rockstar performance brought the Quicken crowd to their feet - and solidified his most fervent supporters viewing from their living rooms - but will it be enough to appeal to undecideds, independents and estranged Democrats?
Trump’s campaign tried to focus the Republican convention on party unity, but it’s apparent that Senator Ted Cruz didn’t get the memo. Most Republicans eyeing future runs for 1600 Pennsylvania Ave have already made peace with Trump, or at least ignored him altogether, and worry a failure to fall in line could backfire if the outspoken and mercurial candidate ends up placing the blame of his defeat - at their feet.
But for over a year now, Cruz and like-minded conservatives have made the case that Republicans will lose again if they nominate an insufficiently conservative candidate, and they’re betting that a Trump loss would prove their point. Cruz is only 45 years old and could have a long political career ahead of him – that is, if his arrogance doesn’t come back to haunt him.
It’s been said that foreign policy is not Trump’s strong suit, and his previous quip that he “watches the shows” to gather geopolitical information further cements that view. So we weren’t surprised when Trump stepped into it again by stating that the US would not necessarily defend new NATO members in the Baltics in the event of Russian attack.
Hmmm...that contradicts everything his newly-minted veep has said, not to mention that it rattles the very foundation of NATO itself, further digging himself into a deeper hole. His lack of foreign policy cred and unorthodox declarations will be on full display throughout the election, especially as his counterpart continually references her experience and steady hand.
Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.
In this excerpt from The Macro Show, Hedgeye Retail analyst Alec Richards and Macro analyst Ben Ryan discuss the companies most vulnerable to the ongoing retail slowdown.
Takeaway: Growth in Existing Home Sales slowed to +3.0% YoY but the main callout was that the share of sales to 1st-time buyers rose to 33%. Headfake?
Another rate of change slow-down in US Existing Home Sales?
Decent print but no real surprises. Growth in Existing Home Sales slowed to +3.0% YoY in June but the main callout was that the share of sales to 1st-time buyers rose to 33%, marking the highest percentage since July 2012 as unit sales increased to the highest level of the cycle at 1.84M.
The trend here is important because any next leg higher in transaction volumes will require resurgent 1st-time and entry level buyer demand. The past 3 years have been littered with single-month breakout headfakes and false optimism so we’re interested to see if the strength can confirm next month.
The more important housing release will be next week’s Pending Home Sales data for June – which will give us the lead read on sales in the existing market for July.
Bottom Line: You'll be reading about the Housing slowdown in newspapers, in 3 months.
Takeaway: TODAY at 11:00 AM Est
Hedgeye Potomac, in conjunction with the international law firm of Squire Patton Boggs, will be hosting a series of calls on Brexit and will first examine the legal and procedural implications.
With Prime Minister Theresa May now formally installed at 10 Downing Street, we will discuss with Squire’s Brexit Task Force the events following the UK’s exit vote from the EU and what the outcome of the vote spells for the UK and the rest of the world.
The call will take place TODAY at 11:00AM EST with prepared remarks followed by Q&A. A link to slides and dial-in information is included below.
KEY TOPICS ON THE CALL WILL INCLUDE
ABOUT SQUIRE PATTON BOGGS
Squire Patton Boggs is a full service global law firm that provides insight at the point where law, business and government meet. Squire Patton Boggs consists of over 1,500 lawyers in 45 offices across 21 countries.
Squire Patton Boggs’ Brexit Task Force is a multi-disciplinary team of lawyers and policy advisers who are uniquely placed to support clients from across the globe on the effects Brexit will have on business.
The Public Policy teams, particularly in Brussels and Washington, D.C., consist of top tier lawyers with considerable public policy experience - which helps them provide seamless and coordinated discussions with the relevant authorities.
Confirmation Number: 13641782
Materials: CLICK HERE
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