Equity Volume

[Mr. G]

Greetings one and all!
Here is a thought; I’d be interested in hearing everyone’s opinion on this.
There are large numbers of trading systems that use volume to a greater or a lesser extent. One could argue that all should but that would be another thread. Volume is included in most (all?) charting software.
Ok, so if we are looking at an LSE stock, maybe Vodafone or BP – it really matters not which – then one would assume that we are looking at volume as reported on the LSE. This is fine if you executing on the LSE, maybe via a DMA platform.
If, however, you are trading a future wouldn’t you want to see all volume in the underlying stock? So, again if you are looking at Vodafone, would you (or should you) care about volume executed off of LSE. I’m thinking specifically of trades done on one of the new MTFs like Chi-X.
Surely as volume fragments across multiple exchanges as the large houses try and comply with their best execution obligations under the MiFID regulations, trading systems that are relying on volume need to have volume from all execution venues accounted for. For certain DAX stocks volume on Chi-X accounts for around 40% of the total trading activity some days; if you are only looking at DAX volume then you aren’t seeing the full picture so any decisions you make about trading breakouts with volume could be flawed.
Thoughts anyone?

 

[grantx]

TCA,

I agree that decisions based on volume will be flawed.

I'm not familiar with the equity markets but on Eurex futures trades will go through - from 100 to over a 1000 contracts and will be recorded on the volume bars. However, these will be "Block trades", ie trades between members which do not go through the order book, and therefore have no impact on the price (it doesn't move). The price would certainly move if they did go through the order book.

So you look at your price chart, see large volume and draw incorrect inferences. I have no idea how this can be addressed, I'm afraid.

Grant.

 

[MrGecko]

Are we talking about Index futures or single stock futures?

I too am not that familiar with equity markets, but my initial thoughts are:

Single Stock: Yes
Index: No

 

[grantx]

Mr Gecko,

Are you saying, "Yes", single stock futures volume is flawed; "No", index futures voulme is not flawed? I shouldn't have to deal with such riddles on a Saturday.

Grant.