- \n
- U.S. equities average daily volume (ADV) has grown steadily since 2018<\/li>\n\n\n\n
- ADV post-pandemic is at a new norm of over 10 billion shares, despite a decrease in volatility<\/li>\n\n\n\n
- Increase in retail trading is one of the contributing factors to the growth in volumes<\/li>\n<\/ul>\n\n\n\n
Growing U.S. Equities Volumes<\/strong><\/h2>\n\n\n\n
U.S. equities volumes shifted upward post-pandemic, as seen in Figure 1 below. ADV climbed 62.4% to 11 billion shares in Q1 2020 and has since maintained new norms with the help of higher retail participation. Notional volumes followed a similar path as average daily notional value (ADNV) grew 65.7% to $506 billion in Q1 2020.<\/p>\n\n\n\n
![\"Total](\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\")
<\/figure>\n\n\n\nThis growth is particularly impressive when we look at one of the factors that historically is correlated with volume growth \u2013 volatility. To measure volatility, we used the Cboe Volatility Index\u00ae <\/sup>(\u201cVIX Index\u201d). VIX\u00ae<\/sup> is a measure of future market volatility \u2014 based on a basket of options of the S&P 500 Index \u2014 and is the key measure for market volatility.<\/p>\n\n\n\n
Historically, as U.S. equities volumes grew, the VIX \u00ae<\/sup> Index climbed. An interesting divergence from this pattern occurred in Q1 2021 during the meme-stock phenomenon. The VIX \u00ae<\/sup> Index decreased 2.42 points from 25.62 to 23.20 and total market ADV increased by 4.2 billion shares to 14.7 billion shares. Similarly, a longer occurrence happened between Q3 2022 and Q2 2024 when the total market ADV increased by 586 million shares and the VIX \u00ae<\/sup> Index decreased by 11.02 points.<\/p>\n\n\n\n
<\/figure>\n\n\n\nThis is important context for understanding the underlying market dynamics over the last several years. One contributing factor for this could be the rise in retail trading. We measured retail activity through two proxies: retail-attested orders and pre-market trading.<\/p>\n\n\n\n
Retail-Attested Orders on EDGX<\/strong><\/h2>\n\n\n\n
Retail-attested orders on Cboe\u2019s EDGX Equities Exchange served as an exact measurement of retail volume on the exchange, however it does not cover the entire market. EDGX captures retail through extended execution instructions placed by member firms, either as a retail order or a retail priority order. Retail priority orders on EDGX change the standard price-time allocation model to a price-capacity-time priority model which improves execution quality for investors. Orders that are submitted as retail priority will have priority ahead of all other available non-retail priority interest at the same price level. Posting at the front of the order queue for the same-priced orders submitted on EDGX reduces the time to execution and have both faster time to first fill and time to first full fill rates when compared to non-retail priority orders.<\/p>\n\n\n\n
<\/figure>\n\n\n\nEDGX retail followed a similar path to the overall market and peaked in Q1 2021 but remained at elevated levels. In Figure 3, EDGX retail as a percentage of the total market volume sat at 1.3% and traded an ADV of 147 million shares in Q3 2024, up 176% from Q1 2018 and 85% from Q1 2020.<\/p>\n\n\n\n
Pre-Market Trading<\/strong><\/h2>\n\n\n\n
![\"Total](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/11\/3087ad2857514d33bcbb23b04cf29d51-1100x517.png\")
<\/figure>\n\n\n\n![\"Total](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/11\/59358b6cdd6a4874bf5e3969699d7c6b-1100x518.png\")
<\/figure>\n\n\n\n![\"EDGX](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/11\/8a3c0f7e4fc44391b7c66a18c67bbf3c-1100x517.png\")
<\/figure>\n\n\n\n![\"Total](\"https:\/\/www.interactivebrokers.com\/campus\/wp-content\/uploads\/sites\/2\/2024\/11\/b36570b1410c4e44a3723a056feb86ef-1100x513.png\")
<\/figure>\n\n\n\n