| Index | Recent Threads | Who's Online | Search |
|
|
New Thread |
|
Jrinne
|
I looked at my slippage for almost all of my trades for this year with respect to the different groups in the Tick-Pilot Study.These were window trades. "Almost all" because I was lazy a few days. As you all probably remember there are 4 groups counting the control group. The G1 group requires the prices of stocks be quoted in nickel increments but can actually trade at any value. The rules for groups G2 and G3 are more likely to affect slippage, IMHO. In the below attachments you will see the descriptive statistics for each group. The next two attachments are t-tests done with Excel. G2 had two trades that were very significant outliers (excessively high slippage). "G2 with Outlier Removed" is just as it says: these 2 outliers were removed. I did a t-test comparing the controls and G1 in one group to G2 and G3 in the second group. I got significant highter slippage for G2 & G3 combined. I worried about the outliers and compared the controls & G1 to "G2 Outlier Removed" and G3. The difference continued to be statistically significant. I show the results with and without the outliers removed The results with the outliers removed showed a meaningful difference: 0.10% compared to 0.24% or a difference of 0.14%.The slippage is more than doubled! Statistically speaking I conclude: WE ARE BEING SCREWED (if anyone is offended by that I will edit it: just comment). p = 0.02 I also added some trades from last year and the significance increased. But I was using a different universe last year and the mean slippage was affected. So I only reported this years results. Weakness: The decision to combine the groups is reasonable but was not decided at the onset of the study. Ideally, I would start a new study on Monday and report after a defined time-period such as the end of the year. I will combine the groups as I have done in this study. If I do this I will likely be able the confirm: WE ARE BEING SCREWED! Respectfully, -Jim 
Screenshot 2017-03-10 20.15.47.png
(198671 bytes)
(Download count: 154)
Screenshot 2017-03-10 20.18.42.png
(35206 bytes)
(Download count: 153)
Screenshot 2017-03-10 20.19.01.png
(39668 bytes)
(Download count: 154)
Great theory, "and yet it moves." -Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum. ` |
||
Edit 7 times,
last edit by
Jrinne
at Mar 11, 2017 11:45:48 AM
|
yuvaltaylor
|
Jim - Since you're using window trades, I don't know how applicable this is to folks like me who use only limit orders. For one thing, the tick size program is supposed to improve liquidity, which means fewer partial fills, which means lower commission costs and fewer lost opportunities. I have no idea if liquidity has improved or not. About half the stocks I buy are in the tick size program. But I haven't made enough trades since its inception to evaluate whether it has raised or lowered my overall transaction costs. Fidelity, my broker, just lowered its commission by 37%, but it could be that my overall transaction costs are going to be higher because of the nickel price increments. The bid/ask spreads for the tick size stocks seem to be larger than they used to be. - Yuval Yuval Taylor Product Manager, Portfolio123 invest(igations) Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC. |
||
|
|
yuvaltaylor
|
Here's the preliminary results from a study in Trader's Magazine. Even in Tick Pilot Stocks, Liquidity Comes at a Price Traders Magazine Online News, January 24, 2017 Colleen Ruane and Phil Pearson The Tick Size Pilot Program has resulted in increased liquidity for included small-cap stocks—but that comes at a price. ITG’s analysis, which draws on its proprietary Global Peer database of tick pilot trading by more than 100 institutional investors, finds that trading costs since the pilot launched in October 2016 are almost 50% higher, on average, compared with the control group. Costs for the control group are up 43% since the start of the tick pilot due to changing market conditions, but costs for Groups 1 through 3 in the pilot are up far more - an average of 91% since the start of the pilot (Chart 1). With the Tick Pilot Test Groups accounting for about 4% of U.S. trading volume, this dramatic cost increase can put a drag on trading performance. Here are some suggestions for managing the impact of the Tick Pilot on a trading P&L: Favor algorithms with effective passive routing strategies; many brokers are struggling to execute passively. Increase routing to inverted pricing (i.e., taker-maker) venues. One of the main changes we have seen in tick pilot stocks is a big increase in inverted venue usage, up almost 65% for the Test Groups (Figure 2). This is primarily because of large queues on the NBBO. Avoid liquidity-seeking algorithms that don’t post and only cross the spread. With wider spreads and higher costs, these algorithms are more expensive, as there are not opportunities to trade with narrow spreads. We recommend dark algorithms to take advantage of the increased dark liquidity in tick pilot stocks and spread savings at midpoint. Be sure your settings are set to peg midpoint. While initial data from the tick size pilot suggest quite clearly that trading costs are higher across the board, overall the pilot has run relatively smoothly, with no major issues despite a large technology lift across the industry. Nonetheless, it is still in the early days of this experiment and we are going to continue evaluating the outcome to determine the pilot’s true costs and impact on market structure. Now if anyone out there knows what the stuff about "passive routing strategies," "inverted pricing venues," and "dark algorithms" means, and whether that implies anything about how to actually trade these stocks (i.e. use market rather than limit orders?), please let me know. Yuval Taylor Product Manager, Portfolio123 invest(igations) Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC. |
||
|
|
Jrinne
|
Yuval, I missed your second post during my edits. Thanks!!!! I will have to think (and research) why G1 was affected in their study (compared to controls). Not what I would have guessed and not the case in my small study with my type of trades: but then, I know nothing about "inverted dark witchcraft" and how often it was used in their study population. -Jim Great theory, "and yet it moves." -Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum. ` |
||
Edit 12 times,
last edit by
Jrinne
at Mar 11, 2017 1:37:53 PM
|
|
yuvaltaylor
|
I just remembered something that Marco wrote when he first introduced variable slippage: 3) Add (0.01 / Price) to the result from Step 2 Step 3 would add, for example, 1% to the slippage if the stock trades at $1, 0.1% if it trades at $10, etc. This is because , no matter what, one penny slippage must be paid in every transactions big or small. So for stocks in the tick size program, one would need to add (0.05 / Price) to the result. That can be huge. A low-priced stock like APT would get an extra 1.75% slippage added to every transaction, and because its average daily total is so low, transactions are already quite expensive. (On the other hand, for stocks that trade below $1, you'd need to add only (0.0001 / Price) to the result. I've only just started trading in stocks this cheap, but it was very gratifying to get a limit buy order for TGD filled at 0.4104 when I couldn't get it filled at 0.41.) I wonder whether the variable slippage in our simulations should be altered for stocks in the tick size study. Yuval Taylor Product Manager, Portfolio123 invest(igations) Any opinions or recommendations in this message are not opinions or recommendations of Portfolio123 Securities LLC. |
||
|
|
|