The value of institutional trading in Nasdaq-listed shares declined in 2001 from the previous year, but commissions on Nasdaq stocks increased substantially among the brokers in the Plexus Broker Universe.
After surpassing $1 trillion in 2000, the value of institutional Nasdaq-listed trading by the 561 Plexus brokers that traded in Nasdaq shares fell to just more than $971 billion in 2001, down about 14% from 2000 levels.
Institutional trading activity in exchange-listed shares by the 873 Plexus brokers that traded on major stock exchanges in 2001 was up approximately 28% from 2000, to $2.3 trillion.
While institutional trading value for Nasdaq shares declined in 2001, the number of institutional trades actually increased nearly 23%, to 1.6 million trades, from about 1.3 million trades in 2000, according to Plexus data.
"The dollar value of trades dropped last year, but the velocity of trading increased slightly," said David Hall, managing director of Plexus Group Inc., Los Angeles. "It is a reflection that the average price of Nasdaq stocks (in 2001) were nearly half that of the prior year."
At the same time, institutional commissions on Nasdaq shares moved higher in 2001, increasing to an average 0.8 cents per share, up from 0.3 cents in 2000, as brokers shifted from serving as principals, or market makers, to agency trading. Brokers may charge explicit commissions for agency trading, but profits are incorporated in the spreads for market makers serving as principals.
Mr. Hall said the trend toward higher institutional commissions for Nasdaq trades is expected to continue. Explicit commissions on Nasdaq shares could provide asset management firms more flexibility in their soft-dollar arrangements; because higher commissions mean soft-dollar transactions can be higher, "which gives money managers more flexibility in using their soft-dollar budgets," he said.
The average commission for institutional exchange-listed shares remained constant at 4.6 cents per share in both 2000 and 2001. Trading activity and the number of trades by institutions for exchange-listed shares increased in 2001. The number of institutional exchange-listed trades increased about 34% in 2001, to 3,236,927, from 2,335,912 in 2000, according to Plexus.
Plexus, a transaction process tracking and research firm, provides quarterly brokerage and transaction data to Pensions & Investments.