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Trading Cost and Trade Flows: April 2013 Commentary

ITG — Mon, 20 May 2013 16:01:53 +0000

The developed and emergings markets both saw another month of net trade outflow from the resources sectors, $1.6 billion and $508 million, respectively. Regional developed and emerging MSCI indices saw trade inflow except MSCI North America (-$945mn), MSCI Emerging Latin...
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Spread and Volatility – April 2013

ITG — Tue, 14 May 2013 13:34:46 +0000

VIX fluctuated widely in April while the Dow and S&P500 again reached all-time high. Spread increased for constituents of the S&P500, Russell 2000, MSCI World and MSCI Emerging Market indices.

2013 Russell Reconstitution: Highlights and Observations

ITG — Mon, 22 Apr 2013 20:02:15 +0000

In this edition of The Blotter, Chad Dale, Director, Index & ETF Research, provides a review of the 2013 Russell Reconstitution.

The past several years exhibited dramatically different results—2009 was a textbook index rebalance without the involvement of the speculative community (which was risk averse coming out of the credit crisis), 2010 was influenced by a series of rule changes implemented by Russell while the rebalances in 2011 and 2012 were more “normal” events in both composition and performance. With little in the way of additional rule/methodology changes, and no significant changes in the global macro-economic environment (or corresponding risk appetites) since the 2012 reconstitution, we expect this year’s trade to remain “normal” in much the same way that the prior 2 reconstitutions were.

Canadian Microstructure Review 4Q2012

ITG — Wed, 17 Apr 2013 16:40:44 +0000

Volume declines abated in the fourth quarter, with overall activity in the Canadian equity markets increasing slightly while trading costs decreased. Block activity also increased in Canada, we believe this to be a result of increase swap/derivative trading activity and...
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Trading Cost and Trade Flows: March 2013 Commentary

ITG — Mon, 15 Apr 2013 14:11:34 +0000

We noted a mass exodus from the resources and basic material sectors. There was
a net trade outflow of $3.8 billion and $917 million in the respective sectors in the
developed markets. MSCI World and MSCI North America saw another month of net trade outflow. MSCI Emerging Far East saw net trade outflow of -$1billion. Trade costs increased in the emerging markets from February 2012

Spread and Volatility – March 2013

ITG — Thu, 11 Apr 2013 13:43:59 +0000

VIX traded in the low teens while the Dow and S&P500 reached record levels. Quarter-on-Quarter, the average volatility and spread decreased for constituents of the S&P500, Russell 2000, MSCI World and MSCI Emerging Market indices.

Trading Cost and Trade Flows: February 2013 Commentary

ITG — Mon, 25 Mar 2013 19:49:20 +0000

Developed markets outside of North America saw another month of net trade inflow. Emerging markets outside of Latin America also saw another month of net trade inflow. The financial sector in the developed markets saw another month of significant trade inflow of $2.05 billion. The health sector saw net trade inflow ($2.4 billion) for the first month since November 2012. Trade costs increased in both the developed and emerging markets from January 2012.

Spread and Volatility – February 2013

ITG — Tue, 12 Mar 2013 19:32:55 +0000

Since the financial crisis of 2008 and the highly volatile second half of 2011, February 25, 2013 marked another day of extreme volatility. The VIX index jumped 35% from 14% to 19% and, on average, the S&P 500, Russell 2000...
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Trading Cost and Trade Flows: January 2013 Commentary

ITG — Thu, 21 Feb 2013 23:07:01 +0000

Developed and emerging markets bucked the net trade outflow trend that commenced in July 2012 with net trade inflow. The financial sector in both the developed and emerging markets saw another month of trade inflow. Trade costs increased in both the developed and...
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Year in Review: 2012 Trading Costs, Volatility, Spread and Commissions

ITG — Thu, 21 Feb 2013 14:07:27 +0000

In this issue of the blotter we provide a review of trading characteristics and aim to identify any major changes in 2012.

We examine volatility, spread and trading costs of constituents of the S&P500^®, Russell 2000^®, MSCI World^® and MSCI Emerging Markets^® indices.

Exhibit 1 above shows that the average VIX^® Index in 2H2011 was 30%. The end of 2011 was more volatile than the entire 2012, with the average VIX at 18%. In 1H2012, the VIX index peaked on June 1, 2012 at 27%, triggered by dismal European economic news, disappointing US job figures and slowing growth in China. In 2H2012, volatility levels remained mostly in-line with the average of 17%; however, we did see a second spike of 22%, caused by the fiscal cliff fear on December 28, 2012. The equal weighted average annualized volatility across constituents of major indices, namely, S&P500, Russell 2000, MSCI World and MSCI Emerging Markets showed that 2H2012 was less volatile than 1H2012 (see Exhibit 2).

The equal weighted average spread for constituents of the S&P500, MSCI World and MSCI Emerging Markets remain unchanged between 1H2012 and 2H2012. The average spread for constituents of the Russell 2000 increased from 36bps to 43bps. A small number of securities in the Russell 2000 Index incurred very wide spread during 2H2012 driving up 2H2012 average spread.

The average implementation shortfall (I/S) trading costs increased by no more than 3 bps between 1H2012 and 2H2012 (see Exhibit 4). Given the increase in trading costs and decrease in volatility, trading costs per unit of volatility increased in 2H2012 by 13%, 22%, 17% and 11% for the S&P500, Russell 2000, MSCI World and MSCI EM^® constituents, respectively (see Exhibit 5).