NYSE Goes All Electronic – What Does It Mean?

We are in unprecedented times. The emergence of the global pandemic COVID-19 in the first quarter of 2020 caused severe economic and capital markets shocks. This turmoil was evidenced by sharp price declines – yet spikes in volumes – in equities markets, which closed the first quarter with their worst performance since the financial crisis. The ultimate symbol of these unprecedented times is the closing of the floor of the New York Stock Exchange (NYSE) on March 23, 2020. With the floor closure, market participants are wondering if the NYSE is losing trading market share of equity volumes.

Inside this note, we explore just that question. While market shares can fluctuate based on day, month or time period chosen, we analyze movements in market shares across parent exchange groups, individual exchange licenses and on versus off exchange trading volumes. Prior to the early Easter close week, there was an upward sloping trajectory for NYSE’s aggregated market share from January to that week. Numbers worsened in April, but we do not view it as a significant degree, given: overall January 2 to April 29 share is down 1.6 pps, but the numbers fluctuate weekly throughout the time period and other exchanges also see periods of declines (and also swings) throughout the period. However, based on the downward trend at the end of the time period analyzed, we believe we must wait and see if there will be long-term impacts on NYSE’s market share.

Key highlights include:

  • U.S. equity trading is not quite 100% electronic today
    • NYSE: 2 hybrid exchanges, 3 all electronic exchanges
    • Nasdaq: 3 exchanges, all electronic
    • Cboe Global Markets: 4 exchanges, all electronic
    • IEX: 1 exchange, all electronic
    • We estimate the application of human touch in equity trading is ~1%-2%.
  • NYSE executes volumes through electronic order flow, DMMs and floor brokers on its hybrid exchanges, believing it enhances efficiencies and price transparency for the closing auction
  • Market shares across exchanges (please see appendix for a complete table showing data for all exchanges)
    • 1Q20 market shares: NYSE 24.3%, Nasdaq 18.6%, Cboe 16.7% and IEX 2.6%
    • April 29 vs. January 2: NYSE -1.6 pps, NDAQ +0.9 pps, CBOE -0.8 pps and IEX -0.2 pps
    • February vs. January averages: NYSE +1.5 pps, NDAQ +0.6 pps, both CBOE and IEX flat
    • March vs. January averages: NYSE +0.9 pps, NDAQ +1.2 pps, CBOE +1.1 pps, IEX +0.2 pps
    • April vs. January averages: NYSE -1.4 pps, NDAQ -0.3 pps, CBOE +0.4 pps, IEX -0.5 pps
    • March 23 vs. March 20: NYSE fell 4.0 pps, NDAQ fell 0.8 pps, CBOE up 1.5 pps, IEX flat
    • March 23 vs. March 16: NYSE fell 1.9 pps, NDAQ up 0.3 pps, CBOE up 1.0 pps and IEX fell 0.8 apps
  • Also in this note: details on the NYSE hybrid model; U.S. equity exchange landscape; an explanation of why exchanges run multiple licenses; and volume, volatility and index price charts.




SIFMA Insights
Katie Kolchin, CFA
Director of Research