Community

Question of the Week - Dec 1st 2015

How does performance vary across VWAP Algorithms?

 

Chart 1:  Distribution of Interval VWAP Costs Across Various Algorithms 

 

Chart 2:  Median Interval VWAP Cost by Volatility Condition and Algorithm  

  • Performance across VWAP algo providers is relatively consistent, somewhat unsurprisingly, as they have the same objectives. Performance does vary significantly with market conditions, however, and traders should be aware of how outcomes may change under different circumstances.
  • Median interval VWAP costs across all algorithms were around -1 basis point. Cost distributions vary slightly between algo providers with 50 percent of outcomes between +2 bps and -6 bps, on average.
  • Median interval VWAP costs increase dramatically with increasing volatility. Market conditions play a much larger role than algo selection does when it comes to performance.

 

One full year of US transactions were included in the analysis, from Q4 2014 through Q3 2015. Limit orders were excluded along with orders without valid benchmark prices.

 

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

You may have a question or want to share your view with others in our community, please join the Incubator community and submit your entry. 

 

Comments

You must be logged in to post a comment.

Please sign in or sign up.