Two conclusions from the last week in the summer season, IROs: 1.
Who was in control? Short-term traders.
With new desks being added, total volume in the sample pool touched nearly two billion shares last week.
Size usually matters, but even more prominent was the wildly fragmented nature of order flow.
In fact, Speculative share volume driven by pure trading systems - ranked second behind Electronic volume and eclipsed total Prime volume (the Morgans, Goldmans, Lehmans, etc.
).
This has happened less than ten times in the past two years combined, though it did happen 8/16-17.
LESSON: We believe that real-time traders triumphed recently and real investors have little to no incentive for active effort right now.
2.
Program-trading in equity baskets declined.
The twilight zone, you ask? Or maybe you're just saying, "What does that mean?" I'll explain.
We run a report designed to measure, by sample group, broad-based basket trading.
The report last week showed that only a half-dozen broker-dealers were trading the entire sample group.
Usually, we will see nearly all the top 25 active.
We do not recall seeing the measure come in so low before.
So, what does it all mean? Well, we might suggest that capital available from institutions to big programs was fairly absent at August's end.
However, that could change here in September.
We will soon see.
The absence of programs combined with the presence of short-term trading could be a result of a fear that could dissipate as Wall Street commences its annual sell-side conference season this month.
It could also mean other, less pleasant things.
Be sure to check back next week when we first test September waters