NYX Nyse Euronext

High-frequency trading firms have found a new favorite stock: Bank of America Corp. (BAC).

A tumultuous month for the banking group, peppered with troublesome rumors, asset sales and an investment from Berkshire Hathaway Inc. (BRKA, BRKB), have made its shares a more attractive target for trading algorithms designed to capture profits from the tiniest price movements.

Computer-powered traders' focus on Bank of America has contributed to an explosion in its popularity. Since late July--when its price fell below $10 per share--turnover in the stock has more than doubled, often making it the most-traded security in the U.S.

"We've definitely noticed an increase," said George Hessler, chief executive of Stock USA Execution Services Inc., an electronic brokerage catering to high-frequency clientele.

Bank of America's increasing mixture of high volatility, low price and deep liquidity has it bearing a stronger resemblance to shares of Citigroup Inc. (C), a favorite of the segment before its reverse split in May. The development is a welcome one for electronic trading shops, which for over a year had been grappling with a slower-paced market before the onset of wide-ranging turbulence this month.

After Citigroup's valuation was badly damaged by the 2008 financial crisis, its cheaply-priced shares were attractive to automated traders that rapidly buy and sell the stock across multiple venues, using complex strategies to spot fleeting price discrepancies and capture rebates paid by exchanges to firms providing market liquidity.

Citi's cheap price--ranging between $7.14 and below a dollar from the beginning of 2009 until its reverse split in May--made it possible to trade a lot of the stock while taking relatively little risk. And the number of shares outstanding, rising to nearly 30 billion as Citigroup sold stock to raise capital and pay back government aid, allowed traders to buy and sell big amounts without disrupting the market.

The company's 10-for-1 reverse split on May 6 pushed its price above $40 overnight and left a gap that Bank of America's trials have enabled it to fill. Citigroup was recently trading at $31.16, up 0.74% for the day.

As the standoff built over raising the U.S. debt ceiling, on July 26 Bank of America shares traded below $10 and since then have generally remained there, falling as low as $6.01 while investors fretted that the group would be forced to raise additional capital. The stock rose last week after Warren Buffett invested $5 billion in a show of faith in the firm and again Monday after Bank of America sold half its stake in a Chinese lender for $8 billion.

Bank of America shares were recently trading at $8.17 a share, also up 0.74% for the day.

From January until late July, an average 158 million Bank of America shares changed hands per day, according to figures from research firm Birinyi Associates Inc. Since the move below $10 per share, that figure has risen to 334 million.

"With the price, news and volatility, it's becoming more suitable to move into that [Citigroup] role," said Mark Turner, co-head of sales trading at electronic brokerage firm Instinet.

There are other signs that more algorithms are embracing the Charlotte, N.C. bank. Floor traders on the New York Stock Exchange are receiving more orders for Bank of America stock, as electronic firms take advantage of NYSE rules that bring higher rebates for posting offers and slice trades up among multiple floor traders.

"We're seeing more of it with each passing day," said Keith Bliss, senior vice president with NYSE brokerage firm Cuttone & Co. "The lower their stock price goes, the easier it is for the prop traders and professional traders of the world to hit it."

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

--Kristina Peterson contributed to this article

Grafico Azioni NYSE Group (NYSE:NYX)
Storico
Da Giu 2024 a Lug 2024

Grafico Azioni NYSE Group (NYSE:NYX)
Storico
Da Lug 2023 a Lug 2024