NZX monthly metrics highlight global trend to smaller, automated trades

Friday 3rd August 2012

NZX cash market trading rose in volume while falling in value last month, reflecting a global trend driven by increased use of automated trading that lets computers decide how to execute trades at the best levels.

Total trades climbed 13.5 percent to 62,299 in July from a year earlier, while average daily trades gained 8.4 percent to 3,150, according to the Wellington-based market operator's monthly metrics. The total value traded fell about 13 percent to $2.3 billion, continuing a trend of recent months. Volumes have risen while value has fallen from a year earlier for each month since January.

"There's been a global trend over the last five years toward algorithmic trading," Sam Stanley, head of business strategy and sales at NZX, told BusinessDesk. "It's not something that dominates the market but it does have an effect."

Using machines to execute orders means a computer might, for example, buy 1,000 Telecom shares in 10 separate trades to ensure they are covered at the best levels, a time-consuming task if done manually by a broker. On the ASX, the average trade size has fallen to just A$8 from A$35 in the past five years.

"You hear these stories of dark pools, high-frequency trading but there's nothing sinister about this sort of stuff," Stanley said. "It is very much a standard market convention in other markets."

NZX's July figures show total equity transactions rose 14.4 percent to 66,426 while the value traded fell 14.4 percent to $2.2 billion. By contrast, total trades of debt securities fell 4.1 percent to 2,873 while the value rose 33 percent to $111 million.

The market capitalisation of equities traded on the NZX rose 3.2 percent to $59.1 billion in July from a year earlier while the value of debt fell 3.8 percent to $15.1 billion.

There were 169 equity securities listed, down 0.6 percent from a year ago, while debt securities fell 6.4 percent to 102.

Shares of NZX last traded unchanged at $1.19 and have climbed 19 percent this year.

BusinessDesk.co.nz

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