an unusual decision by goldman sachs group inc. contributed to huge trading volumes when stock markets opened wednesday. the firm <u+201c>front-loaded<u+201d> an unusually large proportion of client orders, two people familiar with the situation said. the people said goldman injected an abnormally large amount of client orders into the opening auction at 9:30 a.m. exchange run such auctions each morning to rectify imbalances between buy and sell orders that come in overnight and determine the opening price of each stock. goldman<u+2019>s move involved a tweak to its volume-weighted average price, or vwap, algorithm. banks often use such algorithms to get their clients the best price for large stock trades. the process involves breaking up big orders into batches and executing them throughout the day, timing the trades so more of them are fired off at times of greater trading volume. that helps minimize the impact of each trade on the stock<u+2019>s price. normally goldman would execute less than 10% of its client order flow in opening auctions, but in the wake of donald trump<u+2019>s surprise election victory it adjusted its algorithm to do around 25% at the open, one of the people said. the bank told its clients <u+201c>we have a special volume profile today (in other words, a <u+2018>front-loaded vwap<u+2019> curve for our algos) due to the anticipated heightened liquidity around the open,<u+201d> in a note reviewed by the wall street journal. trump<u+2019>s unexpected win caused stock-market futures to plunge overnight before a dramatic reversal when markets opened wednesday. the s&p 500 seesawed wildly in the first two hours of trading and then ended the day with a gain of 1.1%. the new york stock exchange said 81 million shares were traded at the open on wednesday, compared with the daily average in october of 35 million. write to alexander osipovich at alexander.osipovich@dowjones.com and corrie driebusch at corrie.driebusch@wsj.com
post-election goldman algo tweak boosts volumes at open - wsj
corrie driebusch