We shape market thinking. Our experts monitor the latest industry developments, engage current debates, and offer ongoing analysis so we're prepared to offer up-to-the-minute guidance. Based on our well regarded understanding of worldwide financial markets, we are able to take an active role in the conversations that inform market regulations and are positioned to advocate for our clients' interests.
Listen to a special briefing by Duncan Higgins (Head of Electronic Brokerage, London), Juan Pablo Urrutia (European General Counsel, London), and Jamie Selway (Head of Electronic Brokerage, New York) discussing MiFID II, with a focus on the European Parliament’s recent political agreement for the Level 1 Text. Our experts discuss ITG’s position, provide context on what it means for clients, and answer questions.
Our Global Cost Review report for the Third Quarter 2013 studied global commissions and implementation shortfall costs for the period.
On January 14th, Michel Barnier, the European Commissioner in charge of financial services in the European Union (EU) welcomed the agreement in principle reached on rule changes to the Markets in Financial Instruments Directive (MiFID II/ MiFIR). Barnier declared that although the speed of implementation was not ambitious enough, the agreement still represented “a key step towards establishing a safer, more open and more responsible financial system and restoring investor confidence in the wake of the financial crisis” (see: http://europa.eu/rapid/press-release_MEMO-14-15_en.htm?locale=en).
In Asia’s equity markets,liquidity took a nosedivethrough the third quarter of2013 according to ITG’sAsia Pacific ‘LiquidityBarometer’. This tool is a measure that combines turnover, spreads and volatility that was launched in 2008 with a notional value of 1,000.
Our Global Cost Review report for the Second Quarter 2013 studied global commissions and implementation shortfall costs for the period.
The unbundling of research and trading has been a discussion topic for many years both globally and in Asia. While in theory there are many good reasons to unbundle, the practical implications have often made it difficult for asset managers to do so. However now several important business factors are pushing Asia-based fund managers to review their processes and consider how they value research and trading, while using more sophisticated tools to manage and report on who and what they pay.
Our analysis of Canadian equities order flow this quarter indicate that HFT activity has scaled back slightly: total order flow reduced, Order-to-Trade ratio decreased, Volume Traded-to-Order ratio increased, and the rate of order activity has slowed down. We also add to the debate over the cost of real-time market data – we describe an objective method to intrinsically value market data using three core factors. How much should market data be valued?
Unless a TCA system has plentiful data and flexible benchmarks, it will only answer the most basic questions and fail to provide valuable insights that will lead to lower transaction costs and improved fund performance. As in the equity market, the foreign exchange market demands pre-trade analytical tools and peer group analysis that will measure slippage in traditional trading styles as well as quantitative trading and algorithmic trading.
TCA providers must communicate better, but they need help from their constituents. To this end, we applaud the efforts of FIX Protocol groups, led by Mike Caffi of State Street Global Advisors and Mike Napper, from Credit Suisse. They recognize concerns that inconsistency in TCA terminology across providers presents practitioners with challenges. A consolidated glossary is being developed, and as of this writing, groups devoted to TCA for FX, for Fixed Income, and for futures/listed options are being created.
How big is “Big?” Regardless of disparities in alternative estimates, FX trading costs, if not measured and managed correctly, can be a meaningful drag on investment performance. Solutions now exist, which permit leverage to achieve better performance. Investors and traders are beginning to expect counterparty accountability in terms of execution. Focus and measurement are the first necessary steps.