LOS ANGELES - The value of institutional trading in Nasdaq-listed shares for the year ended Dec. 31 was up 164% from 1999 among brokers in the Plexus Broker Universe.
For the first time, Nasdaq-listed share trading for institutions by the 508 brokers in the Plexus universe during 2000 totaled more than $1 trillion ($1.14 trillion).
Heavy trading occurred on the Nasdaq last year during one of the most volatile periods for domestic stocks: major market indexes plummeted after peaking early in the first quarter and then gyrated up and down for the balance of the year.
Institutional trading activity in exchange-listed shares by the 759 brokers in the Plexus universe also increased, with the value up 32%, totaling $1.8 trillion for the year.
A number of factors converged in 2000 resulting in the massive jump in Nasdaq trading. Some of the trading was tax selling by mutual funds taking profits early in the year, according to David Hall, managing director at Plexus Group Inc., Los Angeles. Then, when the market headed down, some managers started trading out of their losers.
In addition, said Mr. Hall, the initial public offering market dried up late in the year and managers might have been trading out of some of their IPO holdings as the market slowed.
The introduction of decimalization on the Nasdaq market also played a part in the increased volume, said Mr. Hall. Decimalization resulted in an increased number of trades with a lower number of shares per trade, he said, because brokers broke large institutional trades into smaller parts as bid/ask spreads narrowed with the start of decimal pricing.
Average commission costs per share remained unchanged from a year earlier, at 4.6 cents for exchange-listed shares and 0.3 cents for Nasdaq-listed shares. Mr. Hall said he expects commissions to begin moving up for Nasdaq-listed shares as institutional brokers continue to work through the decimalization fallout. He said commissions were built into pricing when shares were priced in 16ths, but decimal pricing has cut into broker revenue. Now, he said, brokers are expected to migrate from dealer pricing to agency pricing with negotiated commissions.
Plexus, a transaction process tracking and research firm, provides quarterly brokerage and transaction data to Pensions & Investments.
