Five Views on How Hard It Was to Trade Stock in Monday Meltdown
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It’s a perennial villain, bad liquidity. Veteran traders have been warning that a breakdown in the stock market’s ease-of-use would one day have dire consequences for pricing. So how easy was it to do business Monday, during the worst sell-off in two years?
First the numbers. More than 10.5 billion shares worth $563 billion changed hands in the session, illustrating the extreme efficiency with which computers buy and sell. But high volume is not the same thing as high liquidity. Measures of share turbulence surged, with the Cboe Volatility Index climbing 8 points to 25. Volatility and the role played by electronic market makers are determinants in how easy stocks are to trade. It logically gets harder when prices bounce around.