Asia Pacific Market Structure Chartbook

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1 Q7 AUTHORS Duncan Begg Director Head of Algo Product Management - Asia Pacific ITG Asia Pacific duncan.begg@itg.com Niamh Golden Director Head of Analytical Products - Asia Pacific ITG Asia Pacific niamh.golden@itg.com Heath Mooney Director Senior Sales Trader ITG Asia Pacific heath.mooney@itg.com Bobby So Vice President Product Manager Algorithms ITG Asia Pacific bobby.so@itg.com Clare Witts Director Head of Client Relationship Management ITG Asia Pacific clare.witts@itg.com CONTACT Asia Pacific Market Structure Chartbook HIGHLIGHTS ANALYSIS OF SINGAPORE Q MARKET STRUCTURE CHANGES PAKISTAN ADDED TO CHARTBOOK AND ITG TRADING DESK CAPABILITIES AS INSTITUTIONAL INVESTORS SHOW MORE INTEREST INFOGRAPHIC: RELATIVE SIZE OF Q TRADING IN APAC MARKETS MARKET CAPS ROSE TO ANNUAL HIGHS IN MOST MARKETS, NOVEMBER VOLUMES SURGED, VALUE TRADED IN KOREA SURPASSED HK IN Q Singapore market structure changes SGX introduced a lunch break and widened spreads on selected stocks in mid- November 7. Changes affected approximately 7% of symbols and % of the total value traded. The change did not materially increase value traded in affected stocks, or the overall market, through the rest of Q. It did increase liquidity at the touch and almost doubled the spread of affected stocks to ~7. Overall this pushed the market cap-weighted spread to ~3, the widest in the region x-thailand. Introduction of the lunch break shifted the volume profile slightly toward the afternoon, with a small spike in the afternoon Open and the Close and a reduction in the trading bins immediately after the morning Open. Volume traded in the post-lunch Open has stabilized around.3%. Asia Pacific Canada EMEA United States info@itg.com

2 Q7 Average Daily Value Traded by Month Singapore Average Daily Value Traded by Month Singapore Stocks with New Tick Size Typical Touch Size % Daily Value Traded by Month Singapore Stocks with New Tick Size Market Cap-Weighted Spread by Month Singapore Stocks with New Tick Size 8 3% 7 3% % % % 3 % % % Singapore Volume Profile Before and After Introduction of Lunch Break % % Pre Changes Post Changes % %

3 Q7 3 Pakistan added to ITG trading capabilities and to chartbook Pakistan s inclusion in the MSCI Emerging Market Index is driving institutional investor interest and presents some unique trading challenges, not least the different trading hours for different days of the week. Chartbook data has now been added on p8, and Pakistan will be included in the trading cost summary when a significant sample size is reached in ITG s Global Peer database. The addition of a new market into our data has prompted us to include a new infographic showing the relative volumes traded in APAC markets in Q7. Average Daily Value Traded by Market (USD) Q7 New Zealand $ million Singapore $7 million Australia $.3 billion Hong Kong $.3 billion Japan $9. billion Taiwan $.3 billion Korea $. billion Pakistan $ million Philippines $8 million Indonesia $38 million Malaysia $8 million Thailand $. billion India $.7 billion China $7. billion Developed market Semi-developed market Emerging market Source: ITG

4 Q7 REGIONAL TRADING COST SUMMARY The expected impact of a US$ million market-level portfolio was flat or rose slightly quarter on quarter in most markets. There were a few exceptions: Australia saw a drop, particularly in December, led by lower expected trading costs for large-cap financial stocks; financials also drove the drop in New Zealand. The opposite was true in Malaysia and the Philippines, where expected costs increased. Expected Impact Costs for a US$mm Market-Level Portfolio 3Q7 vs. Q Q3 7 Q 7 Demand for Liquidity of a US$mm Market-Level Portfolio as of Q %MDV Note: The average order size in New Zealand was very large and was removed from this chart for scale purposes.

5 Q7 POINTS OF INTEREST BY MARKET Market capitalization rose to annual highs in most markets while November volumes surged. Value traded in Korea surpassed Hong Kong in Q7. Developed AUSTRALIA (p7): Spreads continued to fall, dropping below in November, the busiest trading month of the year, as the market cap rose and went on to reach an annual high in December. HONG KONG (p8): Volume traded in the closing auction section rose above for the first time this quarter. November saw the highest daily value traded for the year, driving a small reduction in spreads and lower typical touch size. JAPAN (p9): Trading volumes hit annual highs in November as spreads narrowed and typical touch size fell. Average market cap rose toward US$7 trillion by the end of the year. NEW ZEALAND (p): Spreads continued to fall, levelling off through Q with a corresponding drop in typical touch size. Volumes in the Close fell compared with Q3 levels, from approximately 3% to %. Value traded surged to more than US$mm. SINGAPORE (p): Following the introduction of the lunch break and wider spreads on certain stocks, overall spreads widened and volume profiles shifted. Typical touch size was unusually high in October; market cap and value traded remained relatively stable with only a slight uptick in November compared with many other markets volume spikes that month. Semi-Developed KOREA (p): Intraday volatility rose this quarter after three stable quarters, with spreads widening slightly and a particularly notable increase in the range of spreads versus prior months. Typical touch size fell throughout the quarter. It was a record quarter in terms of value traded, putting Korea ahead of Hong Kong for the first time. TAIWAN (p3): Volumes continued to rise in Taiwan, reaching highs of US$.8 billion in November and contributing to consistently high market cap through the quarter. Volality was stable; spreads fell slightly.

6 Q7 Emerging CHINA (p): China s market cap continued its rise since the beginning of the year, reaching more than US$8 trillion. The volume profile skewed toward the morning compared with Q3, with the post-open session rising above % and the end-of-day bin falling from almost % to just above. Spreads narrowed through the quarter. INDIA (p): Spreads dropped significantly this quarter, from over 3. to around.. Typical touch size also fell. Intraday volatility was lower quarter on quarter while trading volumes were higher than any other quarter this year, and market cap rose to finish the year above US$. trillion. INDONESIA (p): Volumes in the pre-close trading session increased this quarter to over plus an additional in the Close auction, alongside an uptick in volatility at that time of day. Market cap rose and finished the year at a high of US$ billion. MALAYSIA (p7): Q volumes rebounded to near Q levels as market cap reached annual highs. Intraday volatility was higher quarter on quarter. Spreads rose slightly in December from previously stable levels, while typical touch size fell. PAKISTAN (p8): As institutional interest in Pakistan increases, we ve introduced Pakistan data to the Chartbook, with certain caveats. Pakistan operates different trading hours on Friday compared to Monday through Thursday; therefore, the volume profile and intraday volatility charts are based on Monday-Thursday data. The Open auction volume is also a proxy based on the pre-open matching data. Value traded in Pakistan fell through 7 from January highs, trading around US$mm through Q. Spread profiles are more erratic than we see in most other emerging markets, ranging from to 33 this year with a wide standard deviation. The market follows a smirk profile, with increased volatility at the end of the day when most volume is traded. We will continue to monitor market trends over the cog quarters. PHILIPPINES (p9): This was the only APAC market this quarter to experience lower trading volumes, despite strong market cap levels. Intraday volatility was generally higher quarter on quarter, with spreads and touch sizes broadly stable. THAILAND (p): Trading volumes jumped in October to over US$.8 billion following the previous quarter s lows. Market cap also finished the year high, at more than US$ trillion. Typical touch sizes dropped this quarter; other metrics remained stable.

7 Q7 Developed Markets 7 AUSTRALIA Volume Profile Q7 Australia Intraday Volatility 3Q7 vs. Q7 Australia 3 st quartile 3Q7 Q7 % % % % Market Cap-Weighted Spread by Month Australia 8 8 Typical Touch Size as a % of Daily Value Traded by Month Australia.%.%.% 3.% 3.%.%.%.%.%.%.% Average Daily Value Traded by Month Australia Average Market Cap by Month Australia. 3..

8 Q7 Developed Markets 8 HONG KONG Volume Profile Q7 Hong Kong % Intraday Volatility 3Q7 vs. Q7 Hong Kong % st quartile 3Q7 Q7 3 % % Market Cap-Weighted Spread by Month Hong Kong Typical Touch Size as a % of Daily Value Traded by Month Hong Kong 3.% 8 3.% 8.%.%.%.%.%.% Average Daily Value Traded by Month Hong Kong Average Market Cap by Month Hong Kong

9 Q7 Developed Markets 9 JAPAN Volume Profile Q7 Japan Intraday Volatility 3Q7 vs. Q7 Japan % % st quartile 3 3 3Q7 Q7 % % Market Cap-Weighted Spread by Month Japan Typical Touch Size as a % of Daily Value Traded by Month Japan..7%. 3.%..3%.%.%.% Average Daily Value Traded by Month Japan Average Market Cap by Month Japan

10 Q7 Developed Markets NEW ZEALAND Volume Profile Q7 New Zealand 7% Intraday Volatility 3Q7 vs. Q7 New Zealand % st quartile 3 3 3Q7 Q7 3% % % % Market Cap-Weighted Spread by Month New Zealand Typical Touch Size as a % of Daily Value Traded by Month New Zealand % % 3 % % % % Average Daily Value Traded by Month New Zealand 8 Average Market Cap by Month New Zealand 3 3 USD millions billions 8 billions

11 Q7 Developed Markets SINGAPORE Volume Profile Q7 Singapore % Intraday Volatility 3Q7 vs. Q7 Singapore % st quartile 3 3Q7 Q7 3 % % Market Cap-Weighted Spread by Month Singapore Typical Touch Size as a % of Daily Value Traded by Month Singapore 3% 3% 3 3 % % % % % % Average Daily Value Traded by Month Singapore Average Market Cap by Month Singapore

12 Q7 Semi-Developed Markets KOREA Volume Profile Q7 Korea Intraday Volatility 3Q7 vs. Q7 Korea % 8 % st quartile 7 3Q7 Q7 3 % % Market Cap-Weighted Spread by Month Korea Typical Touch Size as a % of Daily Value Traded by Month Korea...%.%....%.% Average Daily Value Traded by Month Korea Average Market Cap by Month Korea

13 Q7 Semi-Developed Markets 3 TAIWAN Volume Profile Q7 Taiwan Intraday Volatility 3Q7 vs. Q7 Taiwan % st quartile 3 3Q7 Q7 % 3 % % Market Cap-Weighted Spread by Month Taiwan 3 Typical Touch Size as a % of Daily Value Traded by Month Taiwan 3.% 3.%.%.%.%.%.%.% Average Daily Value Traded by Month Taiwan 7 Average Market Cap by Month Taiwan

14 Q7 Emerging Markets CHINA Volume Profile Q7 China Intraday Volatility 3Q7 vs. Q7 China % st quartile 3Q7 Q7 % 3 % % Market Cap-Weighted Spread by Month China Typical Touch Size as a % of Daily Value Traded by Month China.3%.3% 8.%.%.%.%.%.% Average Daily Value Traded by Month China Average Market Cap by Month China

15 Q7 Emerging Markets INDIA Volume Profile Q7 India % Intraday Volatility 3Q7 vs. Q7 India % st quartile 3Q7 Q7 3 3 % % Market Cap-Weighted Spread by Month India Typical Touch Size as a % of Daily Value Traded by Month India.3%..3% %.%.%...%.%.% Average Daily Value Traded by Month India 7 Average Market Cap by Month India. 3..

16 Q7 Emerging Markets INDONESIA Volume Profile Q7 Indonesia % Intraday Volatility 3Q7 vs. Q7 Indonesia 9 9% st quartile 8 7 3Q7 Q7 7% % 3% % 3 % % Market Cap-Weighted Spread by Month Indonesia 3 Typical Touch Size as a % of Daily Value Traded by Month Indonesia 3.% 3.%.%.%.%.%.% Average Daily Value Traded by Month Indonesia...3 Average Market Cap by Month Indonesia

17 Q7 Emerging Markets 7 MALAYSIA Volume Profile Q7 Malaysia % Intraday Volatility 3Q7 vs. Q7 Malaysia % st quartile 3Q7 Q7 3 3 % % Market Cap-Weighted Spread by Month Malaysia 3 Typical Touch Size as a % of Daily Value Traded by Month Malaysia.% 9.% 8.% 7.%.%.%.% 3.%.%.%.% Average Daily Value Traded by Month Malaysia.7 Average Market Cap by Month Malaysia

18 Q7 Emerging Markets 8 PAKISTAN Volume Profile Q7 Pakistan Intraday Volatility 3Q7 vs. Q7 Pakistan 9 % st quartile 8 7 3Q7 Q7 % 3 % % Market Cap-Weighted Spread by Month Pakistan Typical Touch Size as a % of Daily Value Traded by Month Pakistan. 3.% 3..3%.%.%.% Average Daily Value Traded by Month Pakistan Average Market Cap by Month Pakistan Millions USD USD Billions trillions USD 3

19 Q7 Emerging Markets 9 PHILIPPINES Volume Profile Q7 Philippines Intraday Volatility 3Q7 vs. Q7 Philippines % st quartile 3Q7 Q7 % 3 % % Market Cap-Weighted Spread by Month Philippines Typical Touch Size as a % of Daily Value Traded by Month Philippines...%.%....%.% Average Daily Value Traded by Month Philippines. Average Market Cap by Month Philippines

20 Q7 Emerging Markets THAILAND Volume Profile Q7 Thailand % Intraday Volatility 3Q7 vs. Q7 Thailand % st quartile 3 3 3Q7 Q7 % % Market Cap-Weighted Spread by Month Thailand Typical Touch Size as a % of Daily Value Traded by Month Thailand.%.% 3 8.%.%.%.%.% Average Daily Value Traded by Month Thailand Average Market Cap by Month Thailand

21 Q7 GLOSSARY Expected costs for a US$mm market level portfolio Calculated using ITG s Agency Cost Estimator (ACE) model to estimate the market impact of investing a US$ million portfolio in the index of the different countries.* ACE is a pretrade cost model that estimates transaction costs using a historical framework and is most often used within TCA as a sophisticated measure of order difficulty that accounts for more than just liquidity. The model uses order-specific details, including order size and trading strategy, as well as stock-specific market data specifically -day daily volume, five-day time-weighted spread, and -day historical volatility and makes an important assumption of market neutrality. Demand for liquidity of a US$mm market-level portfolio ITG uses a -day daily volume to calculate the demand of liquidity for any given order size. Volume profile Median average of value traded in the index during the quarter, per -ute time bin. Intraday volatility Quarterly market cap-weighted calculation of change in total value of the index, per -ute time bin. Market cap-weighted spread Market cap-weighted bid-ask spread of the index. Shows range of mean, and levels. Typical touch size as a % of daily value traded Total bid and ask size as percentage of daily volume of all stocks in the market, turnover weighted. Average daily value traded Quarterly mean average daily value traded in the market. Average market cap Mean quarterly average market capitalization (calculated based on close price). * COUNTRY INDICES USED FOR ANALYSIS: AUS ASX KOR KOSPI CHN Shanghai Shenzhen CSI 3 MYS Kuala Lumpur Composite Index HKG HSCI NZL NZX Index Gross IDN Jakarta LQ PHI PSEi Index IND NIFTY SGP Straits Times JPN TOPIX THA Thailand SET Index 8 Investment Technology Group, Inc. All rights reserved. Not to be reproduced or retransmitted without permission Global Peer is a trademark of the Investment Technology Group, Inc., companies. These materials are for informational purposes only, and are not intended to be used for trading or investment purposes or as an offer to sell or the solicitation of an offer to buy any security or financial product. The information contained herein has been taken from trade and statistical services and other sources we deem reliable but we do not represent that such information is accurate or complete and it should not be relied upon as such. No guarantee or warranty is made as to the reasonableness of the assumptions or the accuracy of the models or market data used by ITG or the actual results that may be achieved. These materials do not provide any form of advice (investment, tax or legal). ITG Inc. is not a registered investment adviser and does not provide investment advice or recommendations to buy or sell securities, to hire any investment adviser or to pursue any investment or trading strategy. All trademarks, service marks, and trade names not owned by ITG are the property of their respective owners. The positions taken in this document reflect the judgment of the individual author(s) and are not necessarily those of ITG. Broker-dealer products and services are offered by: in the U.S., ITG Inc., member FINRA, SIPC; in Canada, ITG Canada Corp., member Canadian Investor Protection Fund ( CIPF ) and Investment Industry Regulatory Organization of Canada ( IIROC ); in Europe, Investment Technology Group Limited, registered in Ireland No. 839 ( ITGL ) (the registered office of ITGL is Block A, Georges Quay, Dublin, Ireland). ITGL is authorized and regulated by the Central Bank of Ireland; in Asia, ITG Hong Kong Limited (SFC License No. AHD8), ITG Singapore Pte Limited (CMS License No. 38-), and ITG Australia Limited (AFS License No. 98). All of the above entities are subsidiaries of Investment Technology Group, Inc. MATCHNow is a product offering of TriAct Canada Marketplace LP ( TriAct ), member CIPF and IIROC. TriAct is a wholly owned subsidiary of ITG Canada Corp.