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Question of the Week - May 17th 2016

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

 

Chart 1: Implementation Shortfall and Commission Costs for Large Cap Stocks in the USA 

 

Chart 2: Average Order Sizes for Large Cap Stocks in the USA  

 

  • We regularly look for trends to provide insight into market movements. As we’ve been collecting transaction cost data in some capacity since 2001, we are able to report on long-term trends in order cost and characteristics.
  • The first chart depicts Implementation Shortfall and commission costs for large cap names in the United States. As equity market structure evolved in the early 2000s, we see a decreasing cost trend. After the financial crisis, costs do increase; however, for the last eight years there has been a stable and decreasing cost trend.
  • The second chart shows average order size in dollars and as a percent of median daily volume since Q3 2008. There is a noticeable increasing trend of order size as a percent of MDV while the average size in dollars remains comparatively constant.

 

Transaction costs starting in 2008 Q3 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. Cost data from 2001 through Q2 2008 was sourced from Plexus Group’s Iceberg database. Large Cap stocks are defined as those with a market cap greater than $5 billion (USD).

 

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

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