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Question of the Week - Nov 3rd 2015

How have costs for small cap stocks changed over the past two years?

 

Chart 1:  Distribution of Client-level Implementation Shortfall Costs for Small Cap Stocks 

 

Chart 2:  Distribution of Order-level Implementation Shortfall Costs for Small Cap Stocks 

  • The median client spent 42 bps in transaction costs for US Small Cap stocks in 2015Q2
  • The distribution of client costs in Q2 was noticeably tighter, and median costs have been trending lower over the past three quarters, but this trend is likely to reverse with increased volatility in Q3
  • The median US Small Cap order in ITG’s Peer Group universe cost 4 bps. The distribution of costs on an order level is much wider than on a client level with the 90th percentile reaching +124 bps.

 

Transaction cost distributions 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. Small Cap stocks are defined as those with a market cap between $500 million and $5 billion (USD). The above charts show the cost distribution from the 10th to 90th percentiles.

 

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

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