US Equities Shifting to Low-Cost Execution, Study Shows
- Large sized institutions are shifting trading volume to algo channels of execution.
The migration to algorithmic (algo) channels of execution have been gradually increasing across US equity venues, encompassing both the retail and institutional space. The latest data and consequent study published by Greenwich Associates has shown an uptick in low-cost execution channels, highlighted by a vastly diminished commission figure on trades, per a Greenwich Associates report.
US institutional venues have on the whole been experiencing a lackluster year thus far – in particular, H1 2016 was a one-sided narrative, with figures pointed lower for multiple months. Thanks in large part to Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term-induced Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term, markets finally came to life with exchanges showing rebounding figures for the first time since early 2016 – equities was one such asset class that followed this trend, in many cases seeing yearly highs such as the case of Nasdaq.
In addition to a resurgence of US volumes, equities trades have undergone several notable trends over the past year. According to the recent study published by Greenwich Associates, large sized institutions are shifting trading volume to algorithmic avenues of execution as the overall commission pool remains stagnant. The study featured a panel interviews conducted with 223 US equity portfolio managers and 321 US equity traders between November 2015 and February 2016.
Amongst the notable findings were figures of the annual pool of cash equity commissions paid by institutional investors to brokers on US equity trades, which came in at $9.65 billion over the aforementioned interval – this was down more than -30% from a peak in 2009.
Richard Johnson, Greenwich Associates
According to Richard Johnson, Vice President in the Greenwich Associates Market Structure and Technology group, in a recent statement on the report findings: “While that may seem like a dismal figure, it is important to note that the 2016 level is about 4% higher than the low of $9.3 billion reported in 2013.”
Moreover, the commission pool amongst respondents has also been shrinking consistently, which is due in large part to an uptick in the use of low-cost execution channels. As such, e-trading has been picking up, despite the average share of US equity trading volume directed to electronic channels remaining flat at roughly 38% since 2009. According to the study, the largest commission-generating accounts participating in the study increased their use of algorithmic trading strategies by almost 10% between 2015 and 2016.
The migration to algorithmic (algo) channels of execution have been gradually increasing across US equity venues, encompassing both the retail and institutional space. The latest data and consequent study published by Greenwich Associates has shown an uptick in low-cost execution channels, highlighted by a vastly diminished commission figure on trades, per a Greenwich Associates report.
US institutional venues have on the whole been experiencing a lackluster year thus far – in particular, H1 2016 was a one-sided narrative, with figures pointed lower for multiple months. Thanks in large part to Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term-induced Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Traders Read this Term, markets finally came to life with exchanges showing rebounding figures for the first time since early 2016 – equities was one such asset class that followed this trend, in many cases seeing yearly highs such as the case of Nasdaq.
In addition to a resurgence of US volumes, equities trades have undergone several notable trends over the past year. According to the recent study published by Greenwich Associates, large sized institutions are shifting trading volume to algorithmic avenues of execution as the overall commission pool remains stagnant. The study featured a panel interviews conducted with 223 US equity portfolio managers and 321 US equity traders between November 2015 and February 2016.
Amongst the notable findings were figures of the annual pool of cash equity commissions paid by institutional investors to brokers on US equity trades, which came in at $9.65 billion over the aforementioned interval – this was down more than -30% from a peak in 2009.
Richard Johnson, Greenwich Associates
According to Richard Johnson, Vice President in the Greenwich Associates Market Structure and Technology group, in a recent statement on the report findings: “While that may seem like a dismal figure, it is important to note that the 2016 level is about 4% higher than the low of $9.3 billion reported in 2013.”
Moreover, the commission pool amongst respondents has also been shrinking consistently, which is due in large part to an uptick in the use of low-cost execution channels. As such, e-trading has been picking up, despite the average share of US equity trading volume directed to electronic channels remaining flat at roughly 38% since 2009. According to the study, the largest commission-generating accounts participating in the study increased their use of algorithmic trading strategies by almost 10% between 2015 and 2016.