Nasdaq Liquidity Providers Quiet and NYSE Specialists Gone

Firms making money by supplying market centers with shares of stock went dark last week, down by half from averages, despite a 27% increase in total comparable volume in our statistical set. We also saw order flow double at wholesale desks, which assist other broker-dealers find liquidity to meet demand.

What does that mean for IR? Liquidity providers weren’t in demand because shares were coming into the market without rotating efficiently from buyers to sellers. We all know that every seller needs a buyer. But order flow doubling at wholesalers would appear to demonstrate broker-dealers are doing more buying rather than simply providing shares to investors. Sometimes it means sellers themselves are taking shares back that don’t find buyers at good prices (this happens in the book depth on all order-matching platforms, whether Sotheby’s for art, the Malheur County cattle sale yard in Oregon, or at Wall Street market centers). Bottom line, not many investors were active.

Two conclusions: Macroeconomically, this could further damage the financial results of broker-dealers, who’ve had to commit capital. And in IR terms, it means you should be highly selective about the institutions on your investor relations outreach calendar, because only the metaphorical Apaches will be out raiding.

Let’s change focus for the space remaining. If you missed it, the Wall Street Journal noted today that with NYSE specialists Susquehanna International Group and Van der Moolen shuttering, the Nasdaq is stepping up its effort to switch public companies over. Both specialists will continue with other financial-markets endeavors, but still, two of the seven NYSE specialist shops are now dark – almost one year to the month from the NYSE’s move to a hybrid environment.

And how is the Nasdaq planning to target listed firms formerly tied to these specialists? By assisting them with talking to traders at major market-making firms. "The broker-dealers have been trading their stocks since the beginning of time and understand them," said Chris Concannon, head of Nasdaq Transaction Services.

Huh. Imagine that. Wish we’d thought of—oh wait, we did think of that. Five years ago in fact. Humor aside, at ModernIR we’re happy to see the Nasdaq press the competitive battle. And NYSE listed folks, if you need help seeing what’s going on, you just let us know, now.

Tim Quast is a fifteen-year Investor Relations veteran and founder and managing director of ModernIR.com, which parses and categorizes over a half-billion shares per week with its trading intelligence system, Equity Analysis. See how our customers are utilizing Equity Analysis to enhance their investor relations efforts. For more information, please visit: What is market structure?.