Thinking

  • Over the past 30 years, we have seen regulation repeatedly lower equity spreads, culminating in 2001 with decimalization. For the first time, we are moving in the other direction. How will the pilot program affect trading? Will it become easier to trade small-cap stocks? Phil Pearson explores this in his new paper, “Tick Pilot 2016: Make Small Caps Great Again.”

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  • MiFID II implementation may significantly affect investors’ ability to source dark liquidity effectively. Broker crossing networks will disappear, and certain types of dark trading will be mostly restricted to midpoint.

    If triggered, the introduction of double volume caps will limit certain dark trading volumes per stock to 4% in a single dark pool and 8% across all dark pools. The double volume caps are likely to result in six-month dark trading suspensions for many stocks, increasing market complexity around trading suspended stocks and tracking the status of each stock.

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  • How could IEX’s new exchange status affect your trading?

    In this article, ITG’s Phil Pearson discusses:

    -How ITG accesses IEX and what will change given its new exchange status
    -How the IEX launch will affect market quality
    -What other research on IEX we have planned

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  • The new closing auction session (CAS) on the Hong Kong exchange is showing encouraging signs of increasing stability on the exchange. The launch on July 25, 2016 went without major issues, and data in the first three weeks suggest that the mechanism is doing its job and averting the dreaded “close volatility.”

    CAS volumes have stabilized at around 5% of daily volume, with a rebalance peak of 13% of daily volume. More than 70% of stocks closed within ±20 bps of the reference price and 98% of stocks closed within 1%.

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  • In recent months the Canadian equity market has undergone significant evolution aimed at keeping trading flows within Canada’s borders. The changes appear to have succeeded in increasing Canadian trading volumes, but the impact on the market is at best unclear.

    We have witnessed an increase in Canada’s share of trading in dual-listed securities, alongside a decrease in the MOC auctions’ contribution to total volume. These classic indicators of growing intermediation have been accompanied by a marked increase in Canadian institutional trading costs, both in real terms and versus the U.S. market.

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