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.
Commission Management is increasingly important in Asia, not because of local regulation but because it makes good business sense
Although the use of dealing commissions to buy research and other services is under controversial scrutiny in Europe, most Asia Pacific markets still operate in a fully bundled way. This takes the form of brokerage rates that combine research with execution, and regulation, if it exists, that still refers to soft dollars – a term that has fallen out of favour in the US and Europe. However, investment is now a global rather than a local exercise, therefore demonstrating transparency and accountability in managing clients’ money is top priority when attracting investors and raising funds. Whatever the outcome with European regulatory review, Asian hedge funds and asset managers can implement some simple processes which demonstrate good practice in the use of client’s commissions. This will stand them in good stead for answering investor enquiries on the topic, or addressing regulatory review if the focus widens.
Technology is constantly evolving to meet the demands of increasingly sophisticated asset managers and growing regulatory scrutiny. When it comes to multi-asset investing and the trading tools that go along with it, hedge funds are at the front of this curve and are looking increasingly ‘institutional’ in their use of technology to deal with the wide variety of asset classes they invest in. This is particularly important in today’s markets where the Asian hedge fund industry is growing at a rapid rate, and strategy diversification is an important part of generating alpha and attracting investment.*
Many market participants struggle to find the right tactics to navigate less actively traded stocks. Often these stocks have inconsistent intraday volume patterns. Lower ADV stocks suffer within the strict framework of typical schedule-based algorithmic strategies. Considering volume volatility can improve outcomes.
This targeted call will provide a high level overview of our research on execution tactics that bridge the gap between scheduled algorithmic strategies and the flexibility required to trade less consistently traded stocks.
The New York Stock Exchange went missing-in-action on Wednesday, July 8th for nearly four hours, and the investing world shrugged. Closed for repairs, one could say. ICE (NYSE’s owner/operator) identified the root cause of the issue as an overnight software release. After experiencing intermittent FIX issues all morning, NYSE suspended trading from 11:32 AM through 3:10 PM ET, a period of almost four hours. Most would intuitively expect it to have been a serious concern, but it turned out to be just the opposite. The event caused little pause to trading as equity volumes simply migrated from the NYSE to other exchanges. The suspension was the longest technology-related outage in the history of the Big Board, yet it was a non-event for most equity traders.
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.