Equities Trading Surged 43% in August: Instinet
September 19, 2011
Instinet said it handled 43% more volume in the trading of stocks in the United States in August, compared to July.
The agency-only broker and developer of electronic trading technology said its U.S. brokerage subsidiary had average daily volume of 431 million shares. In options, average daily volume was 363,000 contracts.
The firm set a record of 613,000 contracts in a single day on Aug. 8. That was the second day of trading after U.S. debt was downgraded for the first time ever by a major ratings agency.
"In August, we continued to see strong growth in both US equities and options volumes," said Jonathan Kellner, president of the Americas at Instinet. "While volumes were up Street-wide, we were particularly pleased to see our core institutional flow surge to the extent that it did during the month, indicating that the buy side continues to look to Instinet as a safe harbor during periods of extreme volatility."
Fee-Based Advisers Call Alternatives a Must-Have
As registered investment advisors and fee-based advisers are challenged by increasing market volatility and declines, they are turning to alternative investment classes and tactical allocation to protect their clients' portfolios. This was the major finding of a survey of 500 professionals by Jefferson National.
Roughly 50% said they have increased their use of alternatives, and 76% believe tactical asset allocation can outperform a passive approach over the long term.
"In recent weeks, we've seen the Dow Jones Industrial Average and the S&P 500 Index drop more than 10% off this year's peaks," said Laurence Greenberg, president of Jefferson National. "Advisers are preparing for the reality of ongoing volatility. While the fundamentals of good investing won't change-establish a goal, create a plan, follow a disciplined approach and don't overreact-our survey indicates that in today's turbulent market, advisers are employing alternative assets to provide advantages, such as increased diversification, and they are more confident in the disciplined use of tactical asset management rather than relying only on traditional buy-and-hold."
Margins Taking Direct Hit From Market Decline
Recent market calamities will continue to put a damper on asset growth and margins, as investors are likely to continue to embrace more conservative, lower-fee investment choices, Kasina predicts.
In light of the 10% market correction this quarter, Kasina analyzed the operating profits of 17 publicly traded asset managers, and found that operating margins have already decreased from 31.3% to 29.7%. Conversely, in the second quarter, operating margins rose from 30.4% to 31.3% from the previous quarter.
However, rather than meekly watching customers move into fixed income and money market funds, asset managers can attract investors', brokers' and financial advisers' money by offering alternative, hedge-like products, Kasina suggests.
Surprisingly, only eight '40 Act alternative funds were launched last year, noted Kasina CEO Steven Miyao. "Broker/dealers are asking for these products and paying a premium for them, but there just aren't a lot of products out there that truly mitigate risk," Miyao said.