Question of the Week - June 28th 2016

What does the long term Implementation Shortfall cost trend look like for different order sizes of large cap names in the USA?


Chart 1: IS Costs for Large Cap Stocks in the US by Order Size 


Chart 2: IS Costs for Small Cap Stocks in the US by Order Size 

Lighter colors represent more recent quarters in both of the charts above

  • We are consistently looking for trends to provide insight into market movements. As we’ve been collecting transaction cost data for a substantial period, we are able to report on long term trends in order cost and characteristics.
  • The first chart shows implementation shortfall costs for different order size groups of large cap names in the United States. Costs decreased notably across all order sizes in 2009 following the financial crisis. Despite the rise of high frequency trading and concerns surrounding toxic order flow in the markets, costs continued to decrease quarter over quarter. Global volatility in the second half of 2015 contributed to increased costs in these quarters.
  • Costs for orders of small cap stocks have also decreased since 2009, especially larger order sizes. Small cap realized costs are somewhat more volatile than costs for large cap stocks.


Transaction costs from 2009 Q1 – 2015 Q4 are sourced from ITG’s Peer Group Universe, 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. Orders without valid benchmark prices were excluded along with outlier orders with costs exceeding 5000 bps positiive or negative and orders with commissions less than 0.5 bps or greater than 100 bps. Large Cap stocks are defined as those with a market cap greater than $5 billion (USD) Small Cap stocks are defined as those with a market cap between $150 million (USD) and $500 million (USD).


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

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