July 1, 2020

Spreads, Spread Capture and Trading Strategies

Last week we examined how spread capture has shifted in the 2020 landscape across regions and stocks with varying degrees of liquidity. This week we take a deeper dive at how the percentage of the spread capture by traders changed in 2020. Spreads first widened from the extreme market volatility experienced in March and then narrowed. Our question is: how it differed for a commonly used set of trading strategies?

This week’s highlights:

  • During the peak volatility spike in March 2020, Dark Aggregators were the most used strategies in EMEA for stocks with the widest spreads. In contrast, Liquidity Seeking was the most used strategy in the U.S. for stocks with the widest spreads.
  • In the U.S. the percentage of spread capture for different trading strategies remained relatively constant despite large movements in the spread. In contrast, several strategies in EMEA showed large shifts in the percent of spread capture as spreads fluctuated.

 It is no surprise that spreads peaked while the VIX reached its…

To keep reading, please click here.

By Henry Yegerman, ISS LiquidMetrix

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