A lot can happen in one day, let alone one year.
Execution broker and technology firm ITG has shared with Traders Magazine its data findings for the Securities and Exchange Commissions Tick Pilot program which is rapidly approaching its first-year anniversary. ITGs data spans its algorithmic trading capabilities in the first nine months of the pilot.
First, the firm reported that interval VWAP costs are roughly 60% (~2 bps) higher than the Control Group for Group 1 and 2 and 40% for Group 3, an effect that has persisted throughout the pilot.
Second, proportionally, aggressive trading (i.e. crossing the spread) in Group 1, 2, and 3 names is greater by a few percentage points than Control Group names, passive trading is lower by ~15 percentage points (slightly more in Group 3), and midpoint trading is greater by ~13 percentage points (more in Group 3). These differences continue to drive the trading cost differential.
ITG reported that dark trading is up roughly 50% in Group 1 and 2, and 12% in Group 3-and that growth has increased as the pilot has progressed.
Also, Group 3s relative outperformance in terms of lower trading costs-thanks to a higher incidence of midpoint liquidity-continues to be somewhat of a puzzle.
The substitution from passive to midpoint liquidity provision in dark pools continues to be our best explanation for one of the few positive pilot outcomes thus far, the firm wrote in a note.
