Equities Trading Volume Reaches Record High During Market Tumble

Trading in equities and derivatives hit new records last week. So did trading in currencies and gold (NYSE:GLD), both of which are generally considered safe-haven investments when markets are volatile. According to John Schlitz, head U.S. market technician at Instinet, “A lot of the selling is being driven by uncertainty…It’s panic versus greed, and panic generates higher volume than greed.”

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CME Group (NASDAQ:CME) reported that an all-time volume record was reached Tuesday, beating a peak last year. A total of 25.7 million contracts were traded on the CME across all asset classes, with gold (NYSE:GLD) and Australian dollars hitting record highs. “With all this volatility and uncertainty, people might be nervous about making big, long-term bets on stocks,” said Justin Schack, managing director at Rosenblatt Securities. “The leverage built in to derivatives contracts allows investors to benefit from smaller, shorter-term trades.”

Equity markets are also trading higher than they have since the height of the financial crisis. On Tuesday, the U.S. equity market traded a total volume of 16.2 billion shares, the fifth highest number on record for a single day. Share trades on the London Stock Exchange more than doubled between August 2 and August 9, from £5.3 billion to £10.8 billion. In a 30-second period on Wednesday, just after the market opened, the New York Stock Exchange (NYSE:NYX) saw an all-time message traffic record of 121,257 messages per second.

According to Nicole Sherrod, managing director at TD Ameritrade (NASDAQ:AMTD), “Near-zero rates are forcing people to find alternative ways to generate income.” While institutional investors have been holding back for the past two years, they are now swarming to equities. “The only way to make money in this market is to be highly selective based on fundamentals, and that’s institutional trading,” said Joe Mazzella, global head of trading at Knight Capital Group (NYSE:KCG).

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