Wednesday, February 22, 2017 Stamford, CT USA — It’s getting less expensive for investors to trade emerging market stocks—and ETFs might be the reason why.

Every year, Greenwich Associates interviews institutional investors around the world about the commission rates they pay on equity trades. The results of the Greenwich Associates 2016 Comprehensive Commission Rate Study shows that the premium charged for trades in emerging markets relative to developed markets narrowed dramatically from 2015 to 2016. 

In 2015, institutional investors paid a 56% premium on equity trades in emerging markets relative to brokerage commission rates in developed markets. In 2016, that premium contracted to 43%. 

“This trend suggests that emerging markets are becoming more accessible for equity traders, which could be a result of the ETF boom,” says William Llamas, Associate Director at Greenwich Associates and author of the new report Have Emerging Markets Emerged? An In-Depth Look at the Changing Landscape of Global Equity Commission Rates.

ETFs have allowed both institutional and retail investors the opportunity to invest in emerging markets where size and access barriers previously existed. Ultimately, increased ETF activity should improve the liquidity of underlying shares, further opening investment opportunities. 

2016 Comprehensive Commission Rate Study
The Greenwich Associates 2016 Comprehensive Commission Rate Study provides a thorough look at global commission rates as reported by leading global asset managers. The value of the study is derived from the ability of buy-side equity traders to utilize the data to accurately compare their own commission rates with those of industry peers. The study captures commission rate data on high-touch, single-stock trades, electronic/algorithmic trades and portfolio/program trades, including bundled rates, execution rates and “tack-on” rates. 

The 2016 study finds that headline commission rates have remained largely unchanged in the developed world. In the U.S. market—by far the largest by capitalization—the buy side reports an average high-touch bundled rate of slightly more than 12 basis points (3.7 cps), slightly lower than the 14.9 bps average in developed Europe. Meanwhile, the average “high-touch” bundled commission rate charged by brokers on emerging market equity trades decreased by two basis points from 2015 to 2016, to 22.3 bps.