Read to gain insight from ITG perspectives and proprietary research on best practices in trading and portfolio analytics.
It is important to be aware of changes in intraday volatility, not only in absolute terms, but also relative to the market expectations generated by historical norms and used in many trading models. Awareness of these shifts in market conditions can allow the trader to adapt and change strategies to reduce trading costs.
On May 9, 2011, the shares of Citigroup experienced a reverse split, converting ten shares into one with a nominal ten-fold increase in price per share. Reverse splits are rare events, especially for large capitalization stocks. The publicly available analysis of splits in general concentrates on return characteristics over relatively long horizons.
Using algorithmic trading data across seven strategy types over 2009 and 2010, we examine usage patterns and performance for a sample of buy-side firms served by a multiplicity of brokers.
Following a recent report on TCA published by Greenwich Associates, Ian Domowitz discusses trends in the growing use of TCA and the direction we might be headed.
Exchange-traded funds (ETFs) are relatively new investment tools that are similar to mutual funds, but trade more like stocks. Some of the most popular ETF strategies, such as cash equitization and hedging, rely extensively on accurate index tracking, abundant liquidity and low cost.
Financial regulation lives on the legally assigned characteristics of participants. The definitions of broker-dealer and exchange provide the underpinning of U.S. regulatory fabric and yet it took almost 30 years to craft a definition for ‘the alternative trading system’. Herein lies a lesson: a world in which technology, product strategy, and business models evolve faster than language may be a poor place to apply regulation based on participant silos. Market structure expert, Ian Domowitz, considers this issue and regulatory alternatives in this week’s edition of The Blotter.
Our examination of twelve popular Exchange Traded Funds (ETFs) reveals that ETFs exhibit qualitatively different liquidity and cost characteristics than common stocks. The limit order book for ETFs is deeper than that of common stocks with similar daily share volume, price, spread, and volatility characteristics, especially at price levels immediately surrounding the prevailing mid-quote.
Starting May 26th the Australian regulator (ASIC) had new market integrity rules (MIR) relating to pre-trade transparency exceptions coming into affect. Rule 4.2.1 of ASIC MIR (Competition in Exchange Markets) was revised to introduce tiered thresholds for block trading (also known as “Block Specials” or just “Specials”), while also introducing meaningful price improvement exception to pre-trade transparency (replacing the “at or within the spread” exception) under rule 4.2.3.
The term ‘TCA’ has now become so common across the industry, and some would argue commoditized, that its value is in danger of becoming misunderstood. While most buyside firms use some form of broker post-trade analysis to measure how they’ve performed against their benchmark, the firms who are out-performing versus their peers are using a broader approach of pre-trade, real time and post-trade analytics to answer questions about how and why trading costs are incurred, and what actions can be taken to reduce them.
On July 3, 2013, the courts pronounced caveat emptor with respect to execution performance in the FX market. U.S. District Judge Denise Cote threw out a lawsuit, which accused JPMorgan Chase & Co. of breaching a fiduciary duty to custodial clients by charging “hidden and excessive mark-ups” on currency trades.