November 1, 2013
McKinley Capital Management, LLC utilized data from the Quantitative Research groups of J.P. Morgan and Morgan Stanley to analyze global trading volumes and identified trends in liquidity for the Global Equity and Derivative markets over the past ten years. The analysis was constructed with monthly data from September 2003 through October 2013.
Liquidity in global Cash Equity markets peaked during the 2008 crisis but has resumed long-term averages over the last few years. Year-over-year, daily value traded is up in all regions compared to 2012, but still remains below the levels from two years ago. The 10-year chart shows the trend reversion to normalized volumes following the credit crisis that began in early 2008. Equity volumes in the Americas fell by nearly a third from the peak levels seen in 2008. Volumes in the Asia Pacific region remained relatively stable over the past ten years, with consistent growth since 2009. European equity volumes declined the most since peaking in 2007-2008 but remain higher than 2003 averages
The average daily value traded in 2013 is up 4% across the Americas compared to 2012. Market volumes slowed in July and August, but had an uptick in September after the Federal Reserve announced a delay in tapering its Quantitative Easing program. In the Americas, where listed options markets are highly transparent, there is a continued trend of increased equity option volume in a less liquid Cash Equity environment. The value of daily turnover in single stock options was approximately US$62 billion in recent months, reaching a peak of US$90 billion in 2012, more than twice the value traded in 2008.
The Eurozone crisis and economic growth concerns caused a significant drop in trading volume. Europe experienced an approximately 41% drop in cash equities and nearly a 57% drop in single stock options from 2007 levels. The introduction of the Financial Transaction Taxes (FTT) in countries such as Italy in March of 2013 had a negative impact on volumes, with Italy experiencing a 5.4% decrease in average daily turnover from 2012.
Of the three regions, Asia Pacific continues to see the strongest growth in recent years. Current levels have increased moderately since declining in late 2012, experiencing a 55% rise in cash equities while remaining nearly flat for single stock options. The 37% increase in average daily value traded for 2013 across Asia Pacific is primarily due to market activity growth in Japan.
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All information contained herein is believed to be acquired from reliable sources but accuracy cannot be guaranteed. This presentation is for informational purposes only, and was prepared for academic, financially sophisticated, and institutional investors. It is not intended to represent specific financial services or recommendations for any targeted investment purposes. This material may contain confidential and/or proprietary information and may only be relied upon for this report. The data is unaudited and may not correspond to calculated performance for any specific client or investor in referenced disciplines. McKinley Capital, nor its employees, makes any representations or warranties as to the appropriateness or merit of this analysis for individual use. Investors must seek individualized professional financial advice before investing.
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