The NYSE Arca Options Trading Floor partially reopened on May 4, after its temporary closure on March 23. As a follow up to our recent Q1 2020 Options Review, we wanted to share a few initial observations around market dynamics with open outcry execution once again available. Open outcry is an important mechanism for executing institutional-sized, complex transactions, which benefit from the human judgment that floors provide. As anticipated, there has been a resurgence in volume associated with these types of transactions and the return of certain market participants to the Trading Floor after reopening.
In response to the closures in March, we saw a material increase in the use of electronic auctions for affecting paired trades. In the week since the reopening of the Arca Options Trading Floor, electronic, auction and electronic complex trade shares collectively decreased from the prior week at levels consistent with the gains in open outcry trading. Auction activity in trades above 5,000 contracts experienced a stronger decline, as that volume started returning to trading floors.
|Jan 1 - Mar 22||Mar 22 - May 3||May 4 - May 8|
Open outcry trading is well-suited for the execution of complex multi-leg options trades, as illustrated by the statistics below:
Multi-list options broke nearly all volume records in 2021, driven by the growth of retail participation: daily records (24 of the top 25 volume days of all-time came in 2021), monthly ADV records (April was the only month from 2021 not in the top 12 all-time), and yearly ADV records (37.3M ADV in 2021 was nearly 10M more than in 2020 and double the ADV in 2019).
Increased retail activity in the equities market has affected which stocks are trading the most, and when and where those stocks trade. We’ve previously highlighted retail’s impact on pre- and post-market volume and the opening auction, and now focus on the period immediately after the opening auction. Market participants often avoid this time of day due to higher volatility, an approach worth re-evaluating given current trends.
As the home of ETFs, the NYSE continuously works to strengthen market quality and provide the optimal trading environment for listing and trading ETFs. In April 2021, in service of this goal, the NYSE introduced new requirements and incentives for its industry-leading NYSE ETF Liquidity Program, including the assignment of additional market makers ("Less Active ETF Leads") for new and/or low-volume ETFs.