Trading volume on financial exchanges in April strengthened as investors jostle (NASDAQ:CME)
Financial exchanges like CME Group (NASDAQ: CME), intercontinental exchange (NYSE: ICE) and MarketAxess (NASDAQ:MKTX) released strong trading volume statistics in April at a time when high volatility ripped through financial markets in the wake of tighter monetary policy and looming recession risks, highlighting the conundrum of the “search for yield” of investors.
In some contexts, S&P volatility (VIX), which is negatively correlated to the S&P 500 index (SP500), jumped more than 70% in April and the shares fell 9.1%. Financials (XLF) -9.7% also passed out. The bond market (TLT) -9.8% also faced immense selling pressure as the Federal Reserve further embraces its aggressive pivot to hawkish policy. On May 4, Fed Chairman Jerome Powell assured the United States that 50 basis point hikes “would be on the table” for the next two meetings and that the runoff from the balance sheet should begin in June. It’s no surprise that stocks on financial exchanges also fell significantly in April, with MarketAxess (MKTX) -22.3% and Nasdaq (NDAQ) -13.5% the most, as shown in the table below.
Looking at how trading volumes on individual financial exchanges fared last month, MarketAxess (MKTX) hit the ball out of the park as its average daily trading volume of $38.1 billion soared 56 % year on year in April, helped by “large market share gains across all product areas,” said CEO and Chairman Rick McVey. “We are encouraged by the growing momentum we are seeing in new product areas like US Treasuries and municipal bonds,” he added. However, MKTX -22.3% stocks in April saw a pronounced sell-off. SA’s quantitative rating in March warned MKTX investors of the high risk of poor performance due to its overvalued status and slowdown.
For CME Group (CME), average daily volume of 20.8 million contracts in April was up 26% from the prior year period, helped by growth in ADV interest rates.
Tradeweb Markets (NASDAQ: TW) reported ADV of $1.09T in April, a 22.1% YoY increase. Separately, the quantitative rating screens TW stocks at high risk of performing poorly given negative EPS revisions. For the coming quarter, five analysts have revised its EPS estimates upwards, but there are also five downward revisions. And five analysts revised earnings up, while three revised earnings down.
Intercontinental Exchange (ICE) ADV climbed 16% YoY in April and open interest rose 6%. The increase was driven by growth in ADV in equity options, financials and energy. On May 4, ICE agreed to buy Black Knight for $13 billion in a move that “will expand the addressable market for our mortgage business to $14 billion and better position us to penetrate our existing TAM of 10 billion,” CEO Jeff Sprecher said during his company’s first-quarter earnings call.
Meanwhile, the Quant Rating ranks CME Group (CME) as the top performer in the financial trading and data industry. FactSet Research Systems (FDS) is in second place, followed by Deutsche Böerse AG (OTCPK:DBOEY) (OTCPK:DBOEF) and the London Stock Exchange (OTCPK:LDNXF) (OTCPK:LNSTY).
Earlier this week (May 6), the US economy added 428,000 jobs in April, while the unemployment rate remained at 3.6%.