How Much is Market Structure Hurting Investors? (Credit Suisse)

March 2013

KEYWORDS: transaction costs, market structure, High-Frequency Trading, technology, Institutional Investors, execution cost, Volatility, transaction size, market data

Authors:

Phil Mackintosh

Organizations:
  • Credit Suisse

Summary:
  • Over the past decade, markets have changed significantly.  They are faster, more fragmented and more complex.
  • We try to quantify how much this has affected real investor returns.
  • Using over 7-years of real transaction data, we create the CS Transaction Cost Index. This index is an apples-for-apples measure of shortfall throughout the past 7 years.
  • It shows that trading costs have consistently improved throughout the period.
  • Based on this index, and our estimates of real investor trading, we calculate that real investors are saving around $10bn per year, versus 2005.

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