Steadfast FinancesHow Much Money Exchanges Hands in a Single Stock in Just One Minute

How Much Money Changes Hands in a Single Stock in Just One Minute

Filed in Investing 101 3 comments

One of things that still baffles me about the stock market is the vast sum of money that exchanges hands (electronically of course) at such a blistering pace.

In the blink of an eye, a few million dollar orders can be quietly executed in any given stock and no one pays it any attention. It’s the way it’s always been, so it’s simply standard operating procedure. No big deal.

So yesterday, as I was watching the price action in Baidu.com (known as the Chinese version of Google) react to the news that Google might be pulling out of China for good, I began wondering how much money could actually be exchanged between buyers and sellers of Baidu’s stock in just 60 seconds. The fact that Baidu was trading at $450 per share also aroused my curiosity because it’s not like the Everyday Joe can plop $45,000 for 100 shares on a whim.

So just for fun, I pulled the data stream. Here’s what I found…

In just 60 seconds, a little over 20 Million U.S. Dollars had exchanged hands through the digital ether.

The wealth transfer becomes even more mind boggling when you begin to scale up those numbers from an individual stock and begin to think just how much money changes hands on the major stock exchanges, like the NYSE or NASDAQ, where thousands of stocks are listed and routinely trade several million shares every day.

So is it just me that gets the doe-eyed rookie look, or does this happen to you too?

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Posted by CJ   @   15 January 2010 3 comments
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3 Comments

Comments
Jan 15, 2010
7:08 pm
#1 Ben :

It’s the doe-eyed rookie look.

You need to realize that when the market is trading, that is the entire world trading. When you see volume/trades in Baidu, you need to realize that the majority of the trading action isn’t Average Joe, it’s sophisticated computer models running at the hedge funds buying and selling all day long on a few cents move in the stock. They really don’t care what stock they’re trading in, just that it is moving. They literally have computers sitting in the hedge fund’s office executing trades automatically. How many trades do you think a single computer can execute in a given timeframe?

On top of that you’re seeing mutual funds managing their portfolios with all the money mom and pop are putting into funds daily. You have the ETFs that are continually balancing their portfolios to match the index/sector they’re looking to match. You have insurance companies that are investing backing the policies they’ve written. You have people’s 401k money going in with every paycheck. You have every university with the bulk of their endowments moving around in the market. Then on top of all of this, you have all the self-proclaimed daytraders around the world.

Add it all up and you quickly realize where all that volume/activity is coming from.

Jan 16, 2010
9:48 am
#2 Matt SF :

Ben,

Yeah I get all that, and I wasn’t trying to insinuate that I don’t understand it’s a global marketplace, but the inspiration from this post comes from the fact that so much wealth is exchanged so quickly and with such vigor (in the case of Baidu on 14Jan10) that it occasionally makes me say “wow”.

I try to do simple exercises to make me stay humble, so thought this was a good one.

Jan 16, 2010
3:26 pm
#3 Evan :

Matt,

I know exactly what you are saying! My head always spins when I look at the volume of trading. On Friday, ETFC had 63 MILLION shares traded thats CRAZY
.-= Evan´s last blog ..Studying the Obvious and Figuring Out Why Americans Are Broke =-.

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