Tweet me!The share of program trading in total NYSE volumes has increased to as high as 40% for the week ended June 19, 2009 with total NYSE market volumes in 2009 being lower than the last year. As a result, program trading volumes (including dark pools) are estimated to have turned more influential in determining market movement than ever before.
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In the charts above we have plotted S&P Index (June 2006 to date) with (1) total NYSE volumes (2) total program trading volumes share (in total NYSE volumes) and (3) GS program trading volumes share (in total NYSE volumes). Between February 2009 and June 2009, the markets have rallied around 25% but the rally has not been backed by what would be a bull's desired volume increases. Total NYSE volumes have spiraled down while program trading volumes have moved up. Average daily NYSE volumes have declined 18% over corresponding period last year and 23.5% over average volume for 2008, while program trading volumes have increased 1.8% over corresponding period last year. With a decrease in overall volumes and marginal increase in program trading volumes, the share of program trading in the overall market volumes has increased significantly - rising to 30.7% for the period February 2009 to June 2009 versus 24.6% a year ago. This has given program traders more control and the ability to manipulate the markets. Goldman Sachs, in particular, has substantially increased its program trading volumes. While overall market volume was and is declining, Goldman Sachs' average weekly volume has been creeping higher. For the period February 2009 to June 2009, Goldman Sachs' average weekly volumes more than doubled to 1,173 mn and formed 7.1% of total NYSE volumes, up from 556 mn, or 2.8% of NYSE total volumes a year ago.
- 2. Even more worrying and a material cause of concern is the increase in principal trading which is gaining significant strength to the extent that it is re-defining market movements, particularly by Goldman Sachs. For the week ending June 19, 2009, principal trading by program trading firms accounted for 45.0% of the total program trading volumes and 18.2% of the total NYSE volumes compared with 32% of the total program trading volumes and 8.6% of the total NYSE volumes last year. GS's share in the total principal trading rose to 37.6% for the week ending June 19, 2009 against 21.0%, a year ago. GS's total program trading accounted for 8.3% of the total NYSE volumes with about 82% being the GS's own principal transactions. In the same week last year, GS's program trading accounted for just 2.9% of the total NYSE volumes and 62% of these were GS principal transactions.
| Feb 27, 09 -June 19, 09 | Feb 29, 08 -June 20, 08 | % change y-o-y |
CY 2008 | % change over 08' |
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| Change in S&P index |
25.3% |
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Avg NYSE volumes (daily) |
3,304 |
4,042 |
-18.3% |
4,318 |
-23.5% |
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Avg porgram trading volumes |
1,014 |
996 |
1.8% |
1,037 |
-2.2% |
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PT / Total NYSE volumes |
30.7% |
24.6% |
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24.0% |
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GS volumes (weekly) |
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1,173 |
556 |
110.9% |
670 |
75.2% |
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GS / Total NYSE volumes |
7.1% |
2.8% |
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3.1% |
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MS volumes (weekly) |
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573 |
571 |
0.3% |
560 |
2.3% |
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MS / Total NYSE volumes |
3.5% |
2.8% |
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2.6% |
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- 3. Increased program trading seem to have dented the market's traditional price-setting mechanism, with S&P's volume weighted average price (VWAP) getting registered lower than the S&P close for most of April and May indicating that fewer and fewer high priced deals backed the market movement. This confirms my suspicions that it is a small amount of high frequency traders (primarily Goldman Sachs, et. al, but Goldman in particular) that are dominating the market's troop upwards, more so than any real volume of real buyers actually seeking to purchase stocks at higher prices.
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- 4. We have bifurcated volumes of program trading in up-trending and down-trending markets to determine impact of trending markets on volumes of program trading.
There seem to be no significant difference in volumes during up-trending or down trending market. Since 2008, average program trading volumes in an up-trending market was 1,035 mn, or average share of 26.9% of NYSE total volumes while in a down-trending market the program trading volumes stood at 1,009 mn, or average share of 26.6% of NYSE total volumes. NYSE volumes during up trending market was higher by 1.8% than down trending market while program trading volumes were higher by 2.6% during up trending market.
| Up trending market | Down trending market | |||||||||
| Week | Program trading volumes | NYSE Volumes | Share of program trading | Increase in S&P | Week | Program trading volumes | NYSE Volumes | Share of program trading | Decrease in S&P | |
| Average | 1,035 | 3,987 | 26.9% | Average | 1,009 | 3,915 | 26.6% | |||
| 25-Jan-08 | 1,548 | 6,135 | 25.2% | 0.4% | 04-Jan-08 | 1,099 | 3,525 | 31.2% | -4.5% | |
| 01-Feb-08 | 1,294 | 4,782 | 27.1% | 4.9% | 11-Jan-08 | 1,335 | 4,777 | 27.9% | -0.8% | |
| 15-Feb-08 | 995 | 3,908 | 25.5% | 1.4% | 18-Jan-08 | 1,304 | 5,034 | 25.9% | -5.4% | |
| 22-Feb-08 | 1,004 | 3,951 | 25.4% | 0.2% | 08-Feb-08 | 1,132 | 4,274 | 26.5% | -4.6% | |
| 21-Mar-08 | 1,623 | 5,715 | 28.4% | 3.2% | 29-Feb-08 | 1,115 | 4,216 | 26.4% | -1.7% | |
| 04-Apr-08 | 1,073 | 4,136 | 25.9% | 4.2% | 07-Mar-08 | 1,118 | 4,565 | 24.5% | -2.8% | |
| 18-Apr-08 | 895 | 3,706 | 24.2% | 4.3% | 14-Mar-08 | 1,169 | 4,835 | 24.2% | -0.4% | |
| 25-Apr-08 | 827 | 3,747 | 22.1% | 0.5% | 28-Mar-08 | 980 | 4,074 | 24.1% | -1.1% | |
| 02-May-08 | 926 | 3,790 | 24.4% | 1.1% | 11-Apr-08 | 795 | 3,555 | 22.4% | -2.7% | |
| 16-May-08 | 853 | 3,517 | 24.2% | 2.7% | 09-May-08 | 821 | 3,484 | 23.6% | -1.8% | |
| 30-May-08 | 1,042 | 3,683 | 28.3% | 1.8% | 23-May-08 | 811 | 3,613 | 22.4% | -3.5% | |
| 13-Jun-08 | 853 | 3,937 | 21.7% | 0.0% | 06-Jun-08 | 915 | 4,023 | 22.8% | -2.8% | |
| 18-Jul-08 | 1,256 | 5,479 | 22.9% | 1.7% | 20-Jun-08 | 1,121 | 4,127 | 27.2% | -3.1% | |
| 01-Aug-08 | 997 | 4,403 | 22.7% | 0.2% | 27-Jun-08 | 1,715 | 4,973 | 34.5% | -3.0% | |
| 08-Aug-08 | 908 | 4,226 | 21.5% | 2.9% | 04-Jul-08 | 1,085 | 4,435 | 24.5% | -1.2% | |
| 15-Aug-08 | 898 | 3,924 | 22.9% | 0.1% | 11-Jul-08 | 1,097 | 5,119 | 21.4% | -1.9% | |
| 12-Sep-08 | 966 | 5,433 | 17.8% | 0.8% | 25-Jul-08 | 1,046 | 4,845 | 21.6% | -0.2% | |
| 19-Sep-08 | 1,545 | 7,752 | 19.9% | 0.3% | 22-Aug-08 | 714 | 3,364 | 21.2% | -0.5% | |
| 17-Oct-08 | 1,084 | 6,222 | 17.4% | 4.6% | 29-Aug-08 | 745 | 2,934 | 25.4% | -0.7% | |
| 31-Oct-08 | 925 | 5,212 | 17.7% | 10.5% | 05-Sep-08 | 889 | 4,306 | 20.6% | -3.2% | |
| 28-Nov-08 | 1,010 | 3,182 | 31.7% | 12.0% | 26-Sep-08 | 692 | 3,995 | 17.3% | -3.4% | |
| 12-Dec-08 | 980 | 3,100 | 31.6% | 0.4% | 03-Oct-08 | 907 | 5,361 | 16.9% | -9.4% | |
| 19-Dec-08 | 1,384 | 3,407 | 40.6% | 0.9% | 10-Oct-08 | 1,177 | 7,262 | 16.2% | -18.2% | |
| 02-Jan-09 | 779 | 2,221 | 35.1% | 6.8% | 24-Oct-08 | 855 | 5,228 | 16.4% | -6.8% | |
| 06-Feb-09 | 924 | 3,000 | 30.8% | 5.2% | 07-Nov-08 | 768 | 3,444 | 22.3% | -3.9% | |
| 13-Mar-09 | 1,126 | 3,659 | 30.8% | 10.7% | 14-Nov-08 | 848 | 3,051 | 27.8% | -6.2% | |
| 20-Mar-09 | 1,341 | 4,112 | 32.6% | 1.6% | 21-Nov-08 | 1,172 | 3,841 | 30.5% | -8.4% | |
| 27-Mar-09 | 1,037 | 3,549 | 29.2% | 6.2% | 05-Dec-08 | 1,120 | 3,312 | 33.8% | -2.3% | |
| 03-Apr-09 | 1,089 | 3,344 | 32.6% | 3.3% | 26-Dec-08 | 487 | 1,620 | 30.1% | -1.7% | |
| 10-Apr-09 | 920 | 2,978 | 30.9% | 1.7% | 09-Jan-09 | 871 | 2,660 | 32.7% | -4.4% | |
| 17-Apr-09 | 1,017 | 3,418 | 29.8% | 1.5% | 16-Jan-09 | 1,014 | 3,034 | 33.4% | -4.5% | |
| 01-May-09 | 878 | 2,979 | 29.5% | 1.3% | 23-Jan-09 | 1,050 | 3,305 | 31.8% | -2.1% | |
| 08-May-09 | 963 | 3,742 | 25.7% | 5.9% | 30-Jan-09 | 868 | 2,849 | 30.4% | -0.7% | |
| 22-May-09 | 761 | 2,877 | 26.5% | 0.5% | 13-Feb-09 | 885 | 2,916 | 30.3% | -4.8% | |
| 29-May-09 | 1,070 | 3,173 | 33.7% | 3.6% | 20-Feb-09 | 1,119 | 3,434 | 32.6% | -6.9% | |
| 05-Jun-09 | 821 | 2,901 | 28.3% | 2.3% | 27-Feb-09 | 1,220 | 3,728 | 32.7% | -4.5% | |
| 12-Jun-09 | 686 | 2,233 | 30.7% | 0.7% | 06-Mar-09 | 1,270 | 3,853 | 33.0% | -7.0% | |
| 24-Apr-09 | 965 | 3,511 | 27.5% | -0.4% | ||||||
| 15-May-09 | 927 | 3,265 | 28.4% | -5.0% | ||||||
| 19-Jun-09 | 1,155 | 2,855 | 40.4% | -2.6% | ||||||
