Bats has released an update on its business structure and performance, its first such announcement since going public, with Chief Executive Officer (CEO) Chris Concannon outlining a number of key points for the company.
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Looking closer at the recent figures published by Bats as well as the industry on a whole, volumes appear to be down in H1 2016. Indeed, the group’s volume for the twelve months ending April 30, 2016, is lower by a factor of -9.0% from the same period four years ago, which itself averaged 6.7 billion shares per day.
However, a closer inspection shows that actual dollar amount traded each day has actually risen, albeit by a margin of 15% over the same four-year period to more than $283 billion. This is reflective of an overall increase in notional turnover, despite having levels of liquidity in the market be down. Looking at January 2016 and extending an analysis back to January 2010, Bats’ notional volume rose by 42%.
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While there is not one unified factor in explaining this trend, Mr. Concannon says that one culprit is the ardent refusal of corporate issuers to split their stocks following the end of the financial crisis.
As such, a multitude of popular and large cap US-listed companies have kept their nominal stock prices above $200, $500, and in some cases even $1,000 per share. For every company such as Apple or Google that issued a stock split, other have let their nominal value increase unabated. Unusually high nominal stock prices can potentially impact liquidity in a negative way, as well as trading costs and investor participation, which in turn affects the return of value of equity holdings for investors.
Eye on ETFs
Exchange-traded-funds (ETFs) continue to be one of the most fast growing instruments in the world, with listed ETFs value striking a new record of $2.7 trillion in capital by the end of last year. Moreover, according to data published by Blackrock, assets under management of global exchange-traded products (ETPs) are slated to grow upwards of 17% per annum through 2019. These assets are poised to become an integral component of managed portfolio investments over the next few years.
Furthermore, Mr. Concannon believes that ETFs will serve as an important bridge for emergent investors, i.e. individuals that markets have thus far been unable to reach. He also portends that millennials of the present as well as the future will opt to buy ETFs from their phones for years to come.