The Savvy Investor Execution and Exchanges section provides institutional investors with the latest articles and industry analysis on global stock exchanges, execution venues, trade execution, market structure, and market liquidity.
Trading and trade settlement times have sped up in recent years, with most exchanges operating a standard T+2 (two business days) settlement period. The industry is dominated by exchanges such as the London Stock Exchange (LSE), or the New York Stock Exchange (NYSE)...
There are of course over the counter (OTC) derivatives where institutions trade with each other rather than via an exchange. The section also covers Repo markets, repurchase agreements, with trade settlements managed by Euroclear, Clearstream, CREST and other organisations and clearing processes.
Execution is key. Pension funds that suffer too much withholding tax (WHT) on the dividends of their pooled equity investments. Liquidity shortage or high-frequency trading (HFT), also have an impact. Not wanting to use market order or have limit orders seen by HFT algorithms, pension funds are now having to be savvier with their trading. To remedy this, they will typically use a prime brokerage. Execution under ‘work the trade’ VWAP (volume weighted average price) is a common transaction preference for fund managers.
Cost considerations through the medium of exchange transaction must price in trading commissions, fees, taxes, bid ask spreads, and the size of order moving the market price.
Execution and Exchanges pertain to:
- Regulation (ESMA, MiFID II, UMR)
- Bond liquidity, investment risk
- Cross-asset electronic trading (HFT, algorithmic trading)
- Crypto-asset platform, tokenisation, distributed-ledger technology, blockchain
- Securities lending and custody
- AI, GMOC, conditional orders