NZX figures show trend to smaller, automated trades

Cash market trading rose in volume while falling in value last month, reflecting a global trend driven by increased use of automated trading.

BUSINESSDESK: 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% to 62,299 in July from a year earlier, while average daily trades gained 8.4% to 3150, according to the Wellington-based market operator’s monthly metrics.

The total value traded fell about 13% 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,” NZX head of business strategy and sales Sam Stanley 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 1000 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 $A8 from $A35 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,” Mr Stanley said. “It is very much a standard market convention in other markets.”

NZX’s July figures show total equity transactions rose 14.4% to 66,426 while the value traded fell 14.4% to $2.2 billion. By contrast, total trades of debt securities fell 4.1% to 2873, while the value rose 33% to $111 million.

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

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

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

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