Question of the Week - 9th Feb 2016

How Do current market conditions in Latin America compare to historic?


Chart 1: Spread and Volatility in Latin America  


Chart 2: Weighted Average Implementation Shortfall Costs from ITG’s Peer Universe 

  • Anecdotally, we’ve heard trading is expensive in Latin America due to increasing volatility and uncertainty in Emerging Market economies. We wanted to see how unstable conditions in Latin America affect peer clients today and compare these numbers to historical trends.
  • Since July there has been a sharp increase in volatility with levels at the highest they’ve been in over 5 years. Spreads in Latin America haven’t dropped below 15 bps since early 2013.
  • Weighted average cost in Latin America was 106 bps in 2015 Q4 compared to 73 bps in 2010 Q1. While we do see a lot of volatility in cost quarter over quarter, there is an upward trend. As a comparison, weighted average cost was 44 bps in the US and 74 bps in Emerging Asia in 2015 Q4.


Transaction costs are based on ITG Peer Group Database, which contains order-level information from approximately 180 buy-side institutions. Implementation shortfall costs are measured relative to the release to the desk and are expressed in basis points. Volatility and spread numbers were calculated using the Constituents of the IShares MSCI Latin America 40 ETF. Emerging Asia was defined as any trades in Afghanistan, Bangaldesh, Bhutan, Brunei, Cambodia, China, Christmas Is, East Timor, Fiji, French Pacific, Guam, Heard/MacdonId, India, Indonesia, Kazakhstan, Kiribati, Laos, Macau, Malaysia, Maldives, Marshall Island, Mongolia, Myanmanr, Nauru Island, Nepal, Norfolk Island, North Korea, Pakistan, Palau, Papua N. Guinea. Phillippines, Pitcairn Is, Samoa, Samoa (West), Solomon Island, South Korea, Sri Lanka, Taiwan, Thailand, Tokelau, Tonga, Tuvalu, Vanuatu, Vietnam.


Refer to ITG Peer Analytics for information on available ITG Peer Group Database based analytics.

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