EXCHANGE BOSS: Ultra-high-priced stocks are hurting investors (CBOE, AMZN, GOOGL)

pulse

June 27, 2017 3:52 PM

Some of the biggest players in trading are at the House Financial Services Committee's US Equity Market Structure hearing on Tuesday.

Over 13% of the overall market cap of US corporate securities trade above $200 per share, including

, owner of Google, each currently trading around $1,000 per share. Prior to the financial crisis, companies regularly split their stock to target a price per share of below $100. This was traditionally done to encourage retail participation and ensure liquidity in secondary markets. The recent phenomenon of not splitting stock is having a substantial impact on retail investors and impacting liquidity in the secondary markets.

We recently examined retail orders on one of our equity markets and concluded that retail investors are paying 10 times more in spread for stocks priced above $100 than they are paying for lower priced stocks. We have also concluded that high-priced stocks are experiencing lower volumes, both in terms of share volumes and notional volumes by retail traders. This materially impacts liquidity for large investors, creating additional challenges to trade these stocks. Finally, we compared the market cap growths of ultra-high-priced stocks (defined as those with a price greater than $200) near the start of the bull-run in 2010 to the prices of ultra-high-priced stocks in 2017. The market caps of those ultra-high-priced stocks increased a remarkable 400% compared to approximately 68% for those under $200. With waning retail interest in these names, it raises the question whether many investors are being denied the enjoyment of this growth due to a market under servicing pricier stocks

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