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QOTW (Oct 4th 2016): What is the trading cost of U.S. small cap stocks selected in the Tick Size Pilot Program?

What is the trading cost of U.S. small cap stocks selected in the Tick Size Pilot Program?

 

Chart 1: Peer cost and spread across tick size pilot program groups

 

Chart 2: Peer order sizes across tick size pilot program groups

  • The SEC’s much-anticipated tick size pilot began on October 3.  ITG’s Phil Pearson covered the details of the pilot program and the trading characteristics of pilot stocks in his recent note, Make Small Caps Great Again, but we wanted to add one data point to the conversation.  We’ve leveraged our Peer Universe to calculate average order level costs for each of the pilot groups. We set a baseline with the costs shown in these charts, and will update these numbers as the pilot progresses.
  • Chart 1 shows dollar weighted average costs for the stocks traded by our Peer Universe participants for each group fall in the range of -72 to -79 basis points and historical spreads for the stocks average between $0.05 and $0.06.
  • Chart 2 shows average and median order value by our Peer Universe participants across groups; order value averages between 170 – 183K and median order value is around 14.8 – 16.4K.

 

Trading costs, spreads and order sizes are based on ITG’s 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. The costs, spread and order sizes are for the initial set of U.S. small cap stocks selected for the tick size pilot program and calculated using the trades executed during the first and second quarters of 2016.

 

Refer to ITG Peer Analytics for information on available Peer Related Analytics.

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