Tiny Tickers, Big Drama

Subdollar volumes are back to setting new highs, skewing the overall volume picture

Last fall, we discussed how subdollar stocks, historically a small corner of the exchange-listed stock universe, had grown in trading volume to become 15% of total market volume. Toward the end of 2023, two tiny subdollar stocks, BETS and GMBL, drove subdollar volumes to new record highs. BETS alone made up 19% of market volume the last week of December. Our Chief Market Policy Officer, John Ramsay, detailed some potential ramifications of this trend in January.

Following the late December spike, subdollar volumes subsided to a “new normal” in the low-teens, until last month. On May 14th, two days after Keith Gill, known as “Roaring Kitty” who helped create the 2021 meme-stock bonanza, “returned” to the internet, retail mania spilled over into subdollar stocks, contributing to an explosion in volume. On May 16th, subdollar stocks peaked at 7.7 billion shares, making up over 45% of market volume on that date. Over 6.3 billion shares of that volume came from just seven stocks (CRKN, GWAV, PEGY, SINT, CYN, BSFC, and BRSH), each with an average price under $0.25 per share and a market capitalization under $20 million at the time. For context, the smallest stock in the S&P 500 by market cap has a market capitalization of more than $6 billion, over 300 times larger than these “meme” stocks.

Compare this with the 9.6 billion shares of daily volume the market averaged in names over $1 in the month of April. It becomes clear that subdollar has completely distorted the overall market volume landscape.

So what does this mean for institutional investors and brokers?

Subdollar volume remained elevated well above 20% for the remaining weeks of May, with various symbols popping up and trading hundreds of millions of shares per day. These subdollar names trade much differently than “normal” stocks, with a higher percentage of their volume trading off-exchange and much more on certain exchanges than others. This distorts the overall liquidity landscape, artificially raising Total Consolidated Volume (TCV) and creating market share fluctuations based on whether a particular venue has more “exposure” to subdollar trading. Any intraday heuristics using overall volume across all symbols can lead to incorrect conclusions about how much is trading and where.

One significant ramification of this distortion is its impact on exchange pricing tiers. These tiers, which are trading discounts offered to firms that trade above a certain volume threshold, are usually expressed as a percentage of TCV. As John Ramsay noted in his January blog, "Inflated trading volume in penny stocks means that the absolute volume of trading needed to qualify for a TCV tier is higher, because the TCV denominator is higher – it becomes much harder to trade a number of shares equal to 1% of a larger pie." This underscores the need to look beyond topline share-weighted market share stats to more granular symbol-level data to see where liquidity really lies within the complex U.S. equities ecosystem.