Do you know where your VWAP curve is? A glimpse of the shifting volume profiles in the US before and after the pandemic

Written by: Thomas Jardine, Customer-Facing Data Scientist, BMLL Technologies

First published in TabbForum

At BMLL, we looked at the changing landscape of volume curves in the top 500 stocks by market capitalization in the US markets for three periods, pre-COVID (March 2018 to February 2020), during COVID (March 2020 to February 2022) and a period since a relative reset to the “norm” (March 2022 to March 2023). This extensive analysis covering 5 years of trade-by-trade data across 500 names is made easy using the BMLL Data Lab, a scalable Python research sandbox.

The biggest standout finding was the increased activity during COVID in the morning session, just after the open. There was over a 1% increase in activity during COVID, from 9.7% to 11.1% from 9:30 am just after the opening print to 10:00 am. And then a slightly smaller increase of 0.5% from 10:00 am to 10:30 am. This activity has since subsided and reverted to previous levels post-COVID.

Conversely, activity in the afternoon session, just before the close, was lighter during COVID - dipping from 15.5% to 14.5% from 3:30 pm to 4:00 pm, excluding the close.

We saw a similar change in activity during the closing auction, with a slight decline from 10.2% to 9.5% during COVID, only to climb back to 10.7% afterwards.

Volumes from 11:00 am to 3:00 pm remained rather stable during all these periods.

This trend points to a market fear of lack of participation later in the day and a higher urgency to complete an activity in the early hours. These fears have abated, with participants feeling more comfortable stretching out their trading into the close.

These changes in market focus can significantly impact performance for time-based algorithms (VWAP) and implementation shortfall (IS) or participation algorithms. Keeping abreast of market participation is important to optimize liquidity access and minimize market impact.

The BMLL Data Lab provides users with access to a normalized format order book, an API with custom functions making the data available in 2-3 lines of code, plus the scalability of the cloud allowing for dynamic storage and compute power. This enables market participants to rapidly focus on insights and analysis.

To find out more about how BMLL granular data can provide you with deeper insight into specific sectors or portfolios, contact us