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.
Yes, the Russell Reconstitution trade is the most over-analyzed, over-brokered index event of the year. But ITG offers an independent, unbiased perspective on the trade. Hopefully this client Quick Call can bring some clarity to the annual chaos for both indexers and active managers.
This call will focus on the following:
- A brief review of the highlights of this year’s trade. Including details of the net funding components we expect to occur this Friday.
- Discussion of the core stocks most likely impacted by the index rebalance.
- The style effect: Insight into the frequently overlooked changes to the Growth and Value Indexes.
- Tools, services and capacity available to navigate the liquidity events later this week.
Executing orders in Latin American equities has never been more complex. The region has evolved from a Global EM darling to a marketplace redefined by outsized debt, scandal, and under-performance. Within this landscape traders are shifting their behavior and managing through a more costly and less liquid environment. This call discusses the following:
- Navigating the increase in regional execution costs vs. the decline in Latin America liquidity
- The emerging conflict between global investors’ shift to self-directed trading vs. local institutional investors’ ongoing reliance on phone and manual execution styles
- Infrastructure, connectivity, and communication hurdles and the potential pitfalls of self-directed trading across Latin America
- NASDAQ experiment of 14 symbols with 5/4 pricing model ran from February through May.
- NASDAQ market share decreased over the whole test period, both in quoted and traded volume.
- Overall market quality impact appears positive due to a significant increase in aggregate top of book depth.
- Trading using ITG Smart Limit Algorithm (SLimit) increased at NASDAQ as a result of shorter queues compared with historic averages.
- ITG believes that increased competition among exchange pricing structures is good for market quality.
Auto-enrolment has triggered a chain reaction in the UK pensions space. The policy led to a study from the Office of Fair Trading to ensure investors were
protected from unfair charges. The OFT study prompted a call for evidence from the Financial Conduct Authority and Department for Work and Pensions to improve transparency in transaction costs. The aim of all this is to enable better decision-making on the part of pension schemes, employers and investors.
At the 2015 Profit and Loss London Conference, ITG’s Jim Cochrane, Director, ITG Analytics, was a panelist on the debate “The New Fix Regime.” The panel’s task was to judge if the recent changes in the fix methodology had a material impact on competition, transparency and market conduct. These changes were only instituted February 15th of this year, making a final judgment premature. However, it is not too early to observe that transparency and directional trading costs are still problems that international portfolio managers will have to confront if they aim to keep up with the competition while fulfilling their fiduciary responsibilities. Asset managers will have to pay a spread or use a combination of matching and algo trading to reduce costs.
Over the past few years big data has proliferated, with a growing number of vendors marketing their wares to institutional investors. These firms claim to offer the institutional investor the ability to generate alpha through the use of raw data sets, when what is really needed is sector- and company-level domain expertise combined with the ability to parse and contextualize large amounts of unstructured data.
As the landscape of corporate credit trading evolves, we are focused on several key issues in 2015. This call discusses the following:
- Shifting liquidity conditions driven by regulatory and structural changes across US credit markets
- Emerging technology solutions attempting to harness the new trading environment
- Advantages and obstacles that investors, traders, and brokers are facing as they manage change
BEST RESEARCH, BEST EXECUTION
Unbundling is coming to Europe. It will be impactful for both the buy-side and the sell-side. It will change the face of research and by extension alter how asset managers execute their order flow. The extent of changes will be understood in the coming weeks when the European Commission (the Commission) publishes the final regulations for approval by the European Parliament and European Council. There are also rumours that the Commission will publish a consultation on unbundling investment research. In this article we examine what changes are likely as well as how planned reforms will impact market practices. We also take the opportunity to remind ourselves how we got here and what the remainder of the journey looks like.
One of the core responsibilities of many Institutional traders is managing cash and risk constraints of a portfolio. Traders often do not take advantage of dark and block trading due to the risk of an unpredictable and unbalanced change to the composition of the executing list. Said differently, the randomness of dark fills makes it very difficult to constrain an optimization using dark as the only source of liquidity. In this paper, we offer a solution to this problem using stochastic programming to create linear constraints for a quadratic optimization. We believe this research can be used by algorithm designers to bridge the gap between two dissimilar, yet useful products: dark aggregation and portfolio trading algorithms.