1、Retail investor trading during COVID-19 volatility May 2020 Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 2 Contents Summary . 3 A Changes in retail investor trading activity in securities markets . 4 Changes in turnover and market

2、share . 4 Trading by new and dormant accounts . 4 Trading frequency and day trading . 5 Exchange traded products . 6 Changes in order characteristics . 6 B Potential retail investor harm in securities markets . 9 Poor market timing . 9 Trading in complex and high-risk products . 10 C Contracts for d

3、ifference and market volatility . 13 Large spike in CFD trading activity . 13 Leverage and volatility magnify risk . 13 Retail client losses trading CFDs during 1622 March 2020 . 14 CFD losses may exceed initial investment amount . 14 Overnight funding costs may erode initial investment amount . 14

4、Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 3 Summary This paper outlines some early observations by ASIC staff on trading in securities and contracts for difference (CFDs) during the volatility caused by the COVID-19 pandemic (CO

5、VID-19 volatility). It was produced to inform our work in managing the impact of the COVID-19 pandemic and is published to raise awareness and provide detail on recent retail investor trading activity and issues of concern. The paper highlights a range of potential retail investor harms. It is divid

6、ed into three parts: (a) Section A sets out the changes we observed in retail trading activity in securities markets; (b) Section B sets out the potential retail investor harm in securities markets; and (c) Section C discusses CFDs and market volatility. Examples in this paper are purely for illustr

7、ation; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Time periods covered in this paper The securities market analysis in Sections A and B is derived from ASICs exchange market surveillance data, using trading through retail brokers. We use this as

8、 a proxy for retail investor activity, but we note that not all trading through these brokers is retail within the context of the Corporations Act 2001 (Corporations Act). The focus period is from 24 February 2020 (the first trading day after the market peak) to 3 April 2020, and the benchmark perio

9、d used for comparison is the six months prior (22 August 2019 to 21 February 2020). The CFD analysis in Section C is based on over-the-counter (OTC) derivatives trade repository data and separate data provided by a sample of 12 Australian licensed CFD providers for the seven days from 16 to 22 March

10、 2020. Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 4 A Changes in retail investor trading activity in securities markets Changes in turnover and market share The average daily securities market turnover by retail brokers increased

11、 from $1.6 billion in the benchmark period to $3.3 billion in the focus period. Retail trading as a proportion of total trading increased marginally, from 10.62% to 11.88%, when benchmarked against the backdrop of total average daily securities market turnoverwhich increased from $15 billion to $28

12、billion (counting both sides of each trade, consistent with retail numbers). Retail brokers were net buyers of securities over the focus period, buying $53.4 billion and selling $48.4 billion. Trading by new and dormant accounts There has been a sharp increase in the daily number of unique client id

13、entifiers (indicative of new client accounts) associated with retail brokers that are appearing for the first time in ASICs trade surveillance data. An average of 4,675 new identifiers appeared per day in the focus period. This made up a total of 140,241 identifiers we had previously not observed. I

14、n the benchmark period, we observed 1,369 new identifiers per day and an average of 34,502 new identifiers appearing in a period of the same length. See Figure 1 for the increase in activity by new and dormant accounts during the focus period. The rate of creation of new accounts (as indicated by th

15、eir identifiers) is roughly 3.4 times higher during the focus period (compared to the benchmark period). In the focus period, new accounts represented 21.36% of all active accounts. New account made up 3.65% of all active accounts in the benchmark period. Retail investor trading during COVID-19 vola

16、tility Australian Securities and Investments Commission May 2020 Page 5 Figure 1: Increase in new accounts and dormant accounts re-entering the market A large number of dormant client identifiers from retail brokers, which had not traded during the preceding six months, started trading again in the

17、focus period. A total of 142,022 dormant retail broker client identifiers did not trade during the benchmark period, but recommenced trading during the focus period. In the focus period, these dormant identifiers accounted for 21.63% of all active accounts. Trading frequency and day trading Retail i

18、nvestors have been trading more frequently. For client identifiers that were active during the focus and benchmark periods, there has been a substantial decline in the average time between trades by the same investor in a particular stock. On average, this was 4.5 days in the benchmark period and on

19、e day in the focus period. This may indicate either investors building up positions more frequently over time or attempting to profit from buying and selling around short-term price movements. For trading in any stock, the average time between trades by the same investor has decreased from 2.5 days

20、to less than one day: see Figure 2. - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 New client identifiersReturning client identifiers Start of focus period Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 6 Figure 2: Re

21、tail investor trading activity and frequency Exchange traded products The average daily turnover in exchange traded products (ETPs), like exchange traded funds (ETFs) and managed funds, has increased from $703 million in the benchmark period to $1.88 billion in the focus period (counting both sides

22、of each trade, consistent with retail numbers). In relative terms, this is an increase of 159%, which compares with the increase in turnover of 86% across the broader securities market. However, the proportion of turnover in ETPs that retail brokers were a party to increased marginallyfrom 58% in th

23、e benchmark period to 61% in the focus period. A significant proportion of the non-retail activity in these products is typically conducted by market- makers as opposed to institutional investors. Changes in order characteristics Increases in new retail trading have also seen changes in order charac

24、teristics, including the use of orders that remain open until cancelled (i.e. good til cancelled or GTC). GTC orders provide the benefit of order queue priority and the possibility of orders away from current market prices being hit if there are overnight price moves. But they are exposed to signifi

25、cant price swings in response to overnight international news and market performance, and may expose retail investors to unexpected losses. 4.5 2.5 1 0.9 Average days between trades of same stock Average days between trades of any stock Benchmark period (22 August 2019 to 21 February 2020) Focus per

26、iod (24 February to 3 April 2020) Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 7 Figure 3: Number of GTC orders submitted by clients of retail brokers In the period from 1 January to 1 April 2020, usage of GTC orders by clients of

27、retail brokers increased dramatically: see Figure 3. These clients were also responsible for the vast majority of GTC orders. Figure 4 shows the number of accumulated GTC orders that did not execute intraday, and hence were restated at the beginning of the next trading day. As volatility and retail

28、trading increased, initially the accumulated restatements dipped even as the use of GTC orders increased. This could be because many GTC limit orders far away from current market prices were able execute intraday due to extreme volatility. As volatility tempered recently, we started to see a build-u

29、p of GTC orders that were not hit intraday, and hence were restated at the start of the next trading day. - 10,000 20,000 30,000 40,000 50,000 60,000 70,000 Retail GTC orders Start of focus period Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May

30、 2020 Page 8 Figure 4: Number of GTC orders restated for clients of retail brokers 50,000 60,000 70,000 80,000 90,000 100,000 110,000 120,000 130,000 140,000 150,000 GTC restatements retail Start of focus period Retail investor trading during COVID-19 volatility Australian Securities and Investments

31、 Commission May 2020 Page 9 B Potential retail investor harm in securities markets Poor market timing The average retail investor was not proficient at predicting short-term market movements over the focus period. Figure 5 compares the daily net buying or selling activity across all retail investors

32、 with the change in price over the next day for the shares that they traded. For more than two thirds of the days on which retail investors were net buyers, their share prices declined over the next day. For more than half of the days on which retail investors were net sellers, their share prices in

33、creased over the next day. If all retail investors held their positions for only one day, total losses would have amounted to over $230 million. While markets generally recover over the long run and tend to grow with economic fundamentals, short-term trading and poor market timing can be a major ris

34、k for investors in volatile markets. Therefore, retail investors should be wary of trying to play the market for short-term price movements by day trading. Figure 5: Net buying and selling activity and next day percentage price changeFocus period (24 February to 3 April 2020) -12% -8% -4% 0% 4% 8% 1

35、2% 16% -600 -400 -200 0 200 400 600 800 24/02/2020 25/02/2020 26/02/2020 27/02/2020 28/02/2020 02/03/2020 03/03/2020 04/03/2020 05/03/2020 06/03/2020 09/03/2020 10/03/2020 11/03/2020 12/03/2020 13/03/2020 16/03/2020 17/03/2020 18/03/2020 19/03/2020 20/03/2020 23/03/2020 24/03/2020 25/03/2020 26/03/2

36、020 27/03/2020 30/03/2020 31/03/2020 01/04/2020 02/04/2020 03/04/2020 $ millions Net buying or selling (LHS)Next day price change (RHS) Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 10 Trading in complex and high-risk products Geare

37、d ETPs Over the focus period, there has been a significant increase in trading activity in ETPs that have geared exposures in the same or opposite direction to market movements. Gearing magnifies the risk of these ETPs, by increasing profits from favourable market movements but also increasing losse

38、s from unfavourable market movements. Additionally, geared ETPs are complex because they are actively managed to periodically reset the level of gearing, to ensure that it remains within a specified range after large market movements. Geared ETPs should not be traded by investors who do not have app

39、etite for this risk or understand the complexity. We saw trading volumes for one geared ETP increase by 16 times the normal volume to become the second most traded ETP. Retail investors were on at least one side of 75% of turnover in this fund during the focus period. Oil-related securities The glob

40、al oversupply and storage issues with oil are impacting Australian financial products that are heavily invested in by retail investors. ETPs and other unlisted managed investment schemes that are exposed to oil futures have seen significant price volatility in response to unprecedented negative oil

41、futures prices. Some saw prices decline over 80% between 24 February and 22 April. It highlights a risk for funds that have exposure to physically delivered commodities, where many investors in the futures contract have no intention of taking physical delivery of the oil. Listed investment companies

42、 and listed investment trusts Low interest rates and the search for yield have led to increased risk taking by investors in the fixed income space in recent times. Even before the COVID-19 volatility, we saw an increasing trend of high-yield issuances and retail investor interest in listed investmen

43、t companies and listed investment trusts. The constituent underlying securities can fall outside the investment-grade credit ratings and bear significant risks in periods of economic stress. We saw the price of some fall by 50% during the focus period. Overall, we have also seen an increasing propor

44、tion of listed investment companies and listed investment trusts trading at greater discounts to their net tangible assets: see Figure 6. This trend pre-dates the COVID-19 pandemic. Retail investor trading during COVID-19 volatility Australian Securities and Investments Commission May 2020 Page 11 F

45、igure 6: Distribution of premiums and discounts of listed investment companies as at 28 February 2020 Source: Based on data from ASX. See the original figure in ASX Monthly Investment Products Report March 2020 (PDF 2.23 MB). BEL, -58.9% AU P, -56.7% M M J, -56.6% SVS, -46.2% CD3, -42.5% CD2, -36.6%

46、 OEQ, -36.0% TGF, -28.6% NGE, -28.1% BAF, -27.0% AIB, -26.2% BTI, -25.8% CDM , -23.9% ECP, -23.1% FGG, -22.7% OZG, -22.5% NSC, -21.3% GFL, -21.0% CVF, -20.7% TOP, -20.5% LRT, -20.5% TEK, -20.3% PGF, -19.6% PIA, -19.4% APL, -19.2% LSF, -19.1% EAI, -18.9% LSX, -18.4% PAF, -18.0% SEC, -17.8% FPP, -17.7% M EC, -17.5% ALF, -17.1% W QG, -17.1% KAT, -16.6% W IC, -16.0% VG8, -15.7