28 October 2021

Why Intraday trading volumes may not impact a share register

SALONI SURI, Investor Relations Executive

A common question asked by our clients is why they see more volume traded on market than captured in the investor tracking report over a period of time.

Trading volumes and Underlying Beneficial Ownership

Most of our clients experience large trading volumes on market but not all trading is reflected in a commensurate change in beneficial ownership. Beneficial ownership analysis is only ever undertaken at a point in time so it identifies changes in holdings of existing shareholders or new entrants between two periods. The more liquid a company’s stock is and the greater the volume traded on a daily basis, the more frequently the analysis should be done to capture the underlying changes in the composition of the register. It is however still possible that investors can buy and sell between the reporting periods and as such won’t be captured in the analysis.

There are other factors contributing to higher on-market trading volumes, one of which is Short Selling, which we discussed in one of our previous blogs – All You Need to Know About Short Selling.  Another such factor is Intraday trading.

What is Intra-day trading and Why it Occurs?

Intraday trading is, as the name suggests, buying and selling of stocks on the same day and it is used as descriptor for a variety of market trading strategies. Intraday price movements are particularly significant to High Frequency and/or Day traders looking to complete multiple trades over the course of a single trading session.

Day traders can drive significant intraday volumes but since they close out positions on the same day these are not reflected in changes in the register composition. Their motivation is less about the fundamentals of stock they are trading, and more about capturing short term price movements with the objective of taking a quick profit. It is common to see spikes in trading specially during results season and corporate news flow can be a contributing factor to the volume of day trades.

A recent study by Charles Schwab showed a big increase in retail investors day trading during the pandemic as they found themselves locked down with time on their hands.

The most extreme version of day trading is High Frequency Trading where specialised trading firms use powerful computers and complex algorithms to transact a large number of orders at extremely high speeds. These high-frequency trading platforms allow traders to execute millions of orders and scan multiple markets and exchanges in a matter of seconds, thus giving institutions that use the platforms an advantage in the open market.

As one of the few providers in the market to generate investor tracking reports, FIRST Advisers has developed techniques over time that enable us to better understand the structure of a company’s register. A company’s periodic analysis of their register will provide insights into the actual changes in underlying beneficial ownership over a period of time. They will also reveal other activities on the register such as stock borrowing and lending, prime broker positions and broker custody holdings (entrepot accounts) that reflect the settlement process arising from a recent purchase or sale by a client.

22 June 2015

The Right – and Wrong – Way to Target Investors

Ron Cameron, Senior Adviser, Investor Relations Public companies seeking to court new investors and build relations with existing ones will almost always be told by some register analysis providers that they should focus on targeting those investors with underweight or overweight positions in their stock, relative to a particular index. In other words, it’s those […]

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