The following is a guest article by Mark Culpin, a cash equities business analyst with previous experience at Redburn and Credit Suisse.
First quarter trading in European and U.S. equities was strong, the best since the first quarter of 2016. The implementation of MiFID II did not appear to dampen market volumes, although activity on non-displayed price venues fell once curbs on dark volume went into effect in March.
European Equities Activity
Although the average level of daily trading activity was lower than in February, March was another strong month for trading activity across Pan-European Exchanges because of the increase in the number of trading days (22 trading days in March vs. 20 trading days in February). March volumes increased 3.5% from February and were up 2.8% from the prior year. March 2018 was the highest monthly total since June 2016.
The trend is clear when looking at quarterly volumes. Building on the very strong levels of activity in January and February, the first quarter 2018 shows the best levels of trading activity since Q1 2016. First quarter trading was up 18.3% from the fourth quarter of 2017 and up 10.3% from the prior year levels.
The only clear evidence of MiFID II’s impact on European equities trading was the impact of dark volume caps which went into effect on March 12th. The percent of trading on non-displayed price venues dropped from 9.5% in the first part of the month to 5.5% after the curbs were in place.
U.S. Equities Trading
US trading volumes eased slightly in March from February levels, but remained strong. Activity fell 4.9% in March but were up 6.2% year-over-year.
Similar to Europe, US equities volume in the first quarter of 2018 was the highest quarterly total since Q1 2016. The first quarter was up 18.3% from the fourth quarter of 2017 and up 10.3% from the prior year.
The robust market volumes should help first quarter equities results for the bulge firms and some of the smaller brokers. Post MiFID II, we will see if the rising tide floats all ships, or if some firms struggle in the increasingly unbundled environment.