The time taken by buy-side traders to complete orders during recent volatile markets declined steeply compared to August, according to GSCS Information Services, a post-trade transaction cost analysis provider.
In the week beginning 6 October – during which the UK’s FTSE-100 index dropped below 4,000 points – the time taken to complete a trade of any size averaged at 17.77 minutes. This compares to an average transaction time of 31.77 minutes in the last week of August, when the FTSE was stable and well above 5,000 points.
In extreme market conditions, Japan’s Nikkei 225 index dropped a record 24% in total, falling from 10,473.09 points on 6 October, to 9,157.49 on 9 October, before dipping as low as 8,115.41 on 10 October. The S&P 500 index lost 18.2% of its value in the same week.
Speaking to theTRADEnews.com on 10 October, Anthony Kirby, director, Financial Services Advisory - Regulatory & Risk Management, Ernst & Young, noted: "When you have sharp dips followed by steep spikes as we've seen this week, the opportunity cost can be colossal if you go in on the wrong timing.”
The same kind of reduction in the time it took to complete trades could also be seen for large orders. In its analysis of transactions worth more than $1 million, GSCS found that trades were being conducted across almost 91 minutes on average during the last week of August, compared to just 52.6 minutes in the week beginning 6 October.
The GSCS data universe includes transactions from more than 300 investment management companies, who use more than 500 institutional brokers.