ITG’s Canadian Market Microstructure Review for Q2 2010 includes the following highlights:

• Volume is higher, spreads are tighter, but tick volatility has increased. Quote size has also increased. The increased tick volatility combined with increased message traffic indicates that new HFT strategies may have arrived.

• When Exchange Traded Funds are excluded, quote size has not increased nearly as much in the past two years, indicating either that Electronic Liquidity Providers or large users of ETF popularity has soared recently. We believe that both are true.

• Increased message traffic year-to-date is correlated with an increase in tick volatility. We suspect that the new entrants to the market who are creating this increase in message traffic are using different strategies than previously seen as they are putting upward pressure on intraday volatility.

This month we will look at the trends in global trading costs and trade flows in the developed and emerging markets. Running through these two case studies, we see a common theme: sometimes whatever trading strategy you employ, trading costs will be determined by overwhelming economic or structural factors. We use the MSCI World Index and additional regional and sector‐specific indices as representative proxies of the universe of easily tradable securities in both developed and emerging markets. Although the focus is on the results for the second quarter of 2010, we will provide some context by looking at trends over the past 6 quarters (from 2009/Q1 through 2010/Q2).

Whether you are a board member, trader or compliance officer, transaction cost analysis (TCA) has become an integral component of the investment management industry. The challenge for the next generation of TCA is to provide focused, analytical frameworks targeted at unique users across an entire organization so that by collective effort a firm is empowered to hone their competitive edge. ITG Post-Trade Analytics™ recognizes that next generation TCA tools must incorporate new asset classes, highlight key metrics including the expected value of effecting change and, most importantly, optimize a user’s ability to rapidly consume complex performance metrics without being overwhelmed by copious amounts of data.

Read the full piece here

ITG Peer Analysis™ introduces ITG’s Global Commission Review (GCR), a profile of global commission statistics organized by region, market capitalization and traded value then presented from both BPS and CPS perspectives. The ITG Peer Analysis transaction universe (The Peer Universe) is composed of trade data originating from more than 300 clients including 38 of the 50 global fund managers*. GCR commission statistics are extrapolated from the subset of The Peer Universe which contains valid commission data.

ITG’s Quarterly Global Commission Review showed commissions rising across most geographies in 1Q10, with US Commissions averaging 2.5 cents per share, Canada at 2.3 cents per share, UK at 11.5 bps, developed Europe ex-UK at 11.4 bps and Asia ex-Japan at 15.3 bps.

*Fund manager rankings published by Pensions & Investments based on assets under management as of December 31, 2008

ITG’s Portfolio Trading Desk presents its review of Russell Reconstitution 2010.

Highlights:

• Modest returns on effective date of rebalance – several categories
going the “wrong way” until late in the trading day – concentration
of activity towards the close due to early reversal concerns and
large cap liquidity

• Russell 2000 adds outperform Russell 2000 deletes by 2.3% on
trade date – vs. nearly 22% spread last year

• Large cap skew due to rule changes – Russell 1000 Adds
outperform Deletes and Russell 1000 index by over 2% –
(vs. ~5% last year), BRK.B and ACN biggest contributors

• Some speculative activity and/or a healthier swap market may have
helped mute effective date returns – reminiscent of reconstitutions in
the mid-2000’s

• Textbook behavior of all categories during both the week before
and the week after the effective date of the event

Read the full Russell Recap here

Blame it on the sunshine, blame it on the World Cup, blame it on vacations, blame the renminbi?

However you want to look at it, Asia Pacific liquidity hit twelve month lows in June:
• Investor uncertainty in June drove Asian liquidity down, with fears over China’s growth outlook and global credit concerns dampening equity trading activity.
• Both liquidity and turnover were down across the region, hitting twelve month lows in some major markets.

Also this month:
• Intraday volumes shifted further towards the close as quarterly and half year rebalances took effect. Algorithm profiles should be adjusted accordingly.
• Trading costs across the region continue a slight downward trend as trading efficiency remains an area of focus.

Read the full Asia Pacific Liquidity Barometer here

ITG’s Asia Pacific Liquidity Barometer shows a dramatic shift in intra-day volume profiles across the region, as traders waited until later in the day to gauge European reactions to the ongoing credit crisis. This shift was particularly evident in Hong Kong and Japan. Overall, Asia Pacific trading costs remained relatively stable while overall liquidity rebounded.

Read the full Asia Pacific Liquidity Barometer here

The May 6th “flash crash” was tumultuous, but it was hardly without precedent. ITG’s head of Analytic Products and Research, Ian Domowitz, notes the similarities to a flash crash which occurred in May of 1962. He writes about both crashes – and what lessons they may offer us – in this week’s edition of Advanced Trading.

Read the full story here

After the turbulence surrounding last year’s annual Russell Reconstitution, ITG once again strives to provide a useful and accurate Reconstitution analysis for 2010. This year, several factors have led ITG to project increased turnover, pronounced sector weight changes, and a greater likelihood of speculative activity.

This is an updated ITG analysis reflecting Russell’s preliminary list release on June 11th.

ITG Fair Value® helps eliminate stale pricing of mutual funds by establishing fair value prices for international stocks and equity index futures. ITG’s service helps hundreds of mutual funds meet regulatory requirements and prevent market timing trading issues.

In a recent survey, ITG polled asset managers as to when they used fair value pricing. The most common trigger, used by over 38% of respondents, is a move in a benchmark index of greater than 50 basis points. Almost 30% of respondents had no trigger at all, opting instead for daily fair value pricing.