Measuring Liquidity with AbleSlice

Post date: 2024-04-22 19:39:37 GMT

AbleSlice by AbleMarkets now estimates intraday changes in liquidity. The liquidity is highly predictive of institutional activity. How so? Suppose a large pension fund needs to execute a position that calls for buying or selling 50% of all shares outstanding in the markets for a particular stock (yes, that happens more often than you think). If the pension fund just goes to the markets to process such a lovely order, the required shares may simply not be available. Instead, the pension fund goes to one of the large market makers and asks them to assemble the required shares in advance of the pension fund’s purchase. The market maker builds up the inventory per request and the transaction then takes place in one of the dark pools. All the markets typically see is an unusually high volume on that particular execution day. Of course, the long-term impact is the fundamental change in the price of the traded stock.

AbleMarkets deploys sophisticated proprietary AI to glean the liquidity changes from public data, now across all the U.S. stocks, as well as the issues listed in the U.K., Israel and Singapore. Our most recent research shows that the daily changes in liquidity for the given issues in the dark pools are 99.9% predictive of the upcoming market movements in those stocks’ prices. The higher the build-up of the buy-side liquidity, the more likely the institutional sell to go through in the next few days, the lower the price is expected to drop. Similarly, the higher the build up of the sell-side liquidity, the more likely the large institutional buy orders to go through, the higher the price is expected to rise.

There are, of course, regional differences in responses. In the U.S., for instance, the liquidity metrics work well across all sizes of stocks, but better for smaller-priced stocks. For Singaporean issues, however, the largest stocks are the ones with the strongest liquidity - institutional orders connection. Perhaps the largest market makers in the world are just not so keen in making markets in small Singapore stocks.

Interested in finding out more? Please contact us for more information today: email Irene Aldridge at irene@ablemarkets.com.

Disclaimer:

This research report is for informational purposes only and should not be considered as a solicitation or recommendation to buy/sell securities. It is essential to conduct personal research and consult with a qualified financial advisor before making any investment decisions.