Average trade size plunges

For a glimpse of modern stock trading, look no farther than the size of average trades on the NYSE, Nasdaq and London Stock Exchange. According to new research commissioned by the Financial Times, the average value of stock orders traded on 14 large exchanges has been reduced by 50 percent over the past five years. That holds for futures and options exchanges as well.

On the NYSE, the average size has fallen to $6,400 from $19,400 five years ago (NYSE news). We've come a long way from the days when large block trades were something to brag about, as if they suggested institutional might. Some have suggested that block trades have made a comeback, but the increase in the number of such trades reflects a low comparison point in 2008 and trading in some very low-priced stocks, such as Citigroup.

These days, the most active traders are algorithmically savvy and program-oriented. They slice up orders in savvy ways to executive at the best possible price with minimum ripples. That has fueled the rise of dark pools, which cater to certain traders, often offering handsome rebates (dark pool news). The movement has also fueled a surge in post-trade clearing and settlement costs.

The issue is whether this in any way harms the integrity of the markets. This is a good source of liquidity, but one would hope that liquidity factors in the NBBO set by the markets. Another way of looking at this: Does this handicap other investors? The SEC seems bent on finding answers. 

For more:
- here's the Financial Times article

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