The Capital Markets Cooperative Research Centre (CMCRC) has released new analysis on relative costs of trading in Asia Pacific markets, showing Tokyo to be the cheapest place to trade illiquid securities.
In a new video, CMCRC CEO Professor Mike Aitken uses the Market Quality Dashboard (MQD) to compare the cost of trading in various markets. Comparing Hong Kong, Singapore, Tokyo, Australia and India, the analysis uses relative effective spreads to estimate the cost of demanding liquidity. In Australia, the cost of trading the least liquid group of stocks is highest at 5,481 basis points (bps) on average, whereas in Tokyo it is only 144.43bps. This is cheaper even than NASDAQ where the lowest decile of their securities trades at an average of 281bps. Singapore came in at 2,749bps and Hong Kong 707bps. The cheapest place in the world to trade such securities is NYSE at 65bps.
“Perhaps another way to benchmark the efficiency of markets is to measure the cost of trading in the lowest, rather than the highest, decile of securities in those markets. Under this scenario, the Tokyo market is worth a closer look.”
Price of trading 10th decile securities – JPX, ASX, SGX, HKEx, NSE:
Price of trading 10th decile securities – JPX, NASDAQ, NYSE, HKEx:
Price of trading all securities – JPX, ASX, SGX, HKEx, NSE:
Watch Professor Aitken explain this issue in further detail here https://www.youtube.com/watch?v=1ULSIVHUDJ0&list=UUnyU9-4WAduJhlYOGTHTf3w
