3Q18 Global Cost Review

ITG 3Q18 Global Cost Review:
 US Micro Caps in the Spotlight

Noteworthy findings from ITG’s 2018 Q3 Global Cost Review, based on directional and transaction cost data from more than 180 institutional investors.

Overall summary
Last quarter, ITG’s Global Peer data showed strong directional interest in mid-cap stocks in major markets, and in Chinese equities. During 3Q18, strong buy concentrations were observed in the US micro-cap segment and in China once again. Over the period, the trend of lower commissions continued and IS costs retreated to near 2017 levels.


  • On an aggregate basis, ITG’s Global Peer database showed a slightly negative directional indicator1 for global equities with a value of -1.26%. US trade directionality was -3% for the quarter, Europe at -1%, and Asia Pacific ex Japan came in at +7%. Latin America and China also exhibited positive directionality of +9% and +24%, respectively.

  • The most significant trend coming from this quarter’s directional data was within US micro caps. ITG’s Global Peer data showed a directional indicator value of +46% for this asset class. US micro caps served as a portfolio diversifier in an environment characterized by a strong dollar, looming tariffs and deregulation efforts in the US. During the quarter, IS costs of trading in this segment decreased 19% to 53bps and commissions increased from 0.8cps to 1.2cps.

Overall cost of trading

  • With spreads remaining compressed in developed markets (excl. Europe) and equity volatility at bay until the very end, global trading costs for asset managers decreased during the quarter. Global IS costs were 32.6bps in 3Q18, down from the two-year highs of +35bps in Q1 and Q2.
  • U.S. aggregate IS trading costs were 27.8bps, down from 31.9bps in Q2 and comparable to the trailing eight-quarter average. The largest decrease in US costs was seen in micro caps (above), followed by large caps (-14%, 25bps). Small and mid-caps IS costs were down slightly. IS costs in Canada also decreased slightly to 27.2bps, driven by lower costs for small and large caps.
  • Asia Pacific ex Japan IS costs rose 2% to 41.8bps, where slight increases in mid- and large-cap costs overshadowed a 77% decrease in IS for micro caps. IS costs in Japan decreased 19% to 40bps, with large-cap costs down 25% to 30.4bps. IS costs in China decreased significantly, down 69.5% to 18.5bps and driven by large caps.
  • Also defying the trend of decreasing developed market IS costs, European (ex UK) trading was more expensive for our clients in Q3 at 35.7bps (16% increase). IS costs for large-cap European equities rose 23% in the quarter and were most pronounced in Germany and Italy.
  • IS costs in Emerging Asia decreased 14% to 50bps, Emerging Europe was down 1% to 76.4bps, and costs in Middle East & Africa increased 5% to 63.8bps.
  • Aggregate global commissions decreased 5% to 4.4bps. North American commissions fell slightly to 1.7cps, Europe ex UK fell 6% to 4.9bps, and Asia Pacific ex Japan rose 7% to 7.5bps. Emerging Asia commissions fell 0.4bps to 9bps and Emerging Europe declined 0.9bps to 8.2bps.


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1 ITG’s directional indicator calculation is a dollar-weighted measure of trading directionality measured independently within a defined group of securities such as a country or sector and does not imply flow from outside groups. Figures are calculated as (Total Dollar Value of combined buy orders – Total Dollar Value of combined sell orders) / Total Sum of Absolute Dollar Value Traded within the group for the period.

Source: ITG