The plunge in oil prices in late 2014 also led to a bit of a spike in U.S. market volatility, ending what otherwise was a fairly stable year, based on data from Investment Technology Group Inc.
Average volatility for the Standard & Poor's 500 stock index last year was 20%, down from 21% in 2013. Volatility in the first quarter was an average 20%, rising to 21% in the second quarter before dipping to 18% in the third quarter and jumping to 22% in the fourth quarter. ITG measures annualized volatility as the 60-day historical volatility for the S&P 500.
“The oil-price spike certainly is an event that jumps out as a big cause of the higher volatility at the end of the year,” said Colleen Ruane, director, analytics research at ITG in New York.
Added Sandor Ferencz, vice president-analytics for ITG in Culver City, Calif.: “I wouldn't say (2014) was a frightening or volatile year, just in the fourth quarter.”
ITG's volatility data were close to that of the Chicago Board Options Exchange Market Volatility index, which was an average 19.2% for the year.
U.S. trading costs averaged 32.12 basis points in 2014, Mr. Ferencz said. The first quarter saw costs reach an average 33 points, falling to 30.5 points in the second quarter and 29.5 points in the third quarter before rising to 35.5 points in the fourth quarter. That increase paralleled the S&P 500 volatility rise late in the year, he said.
The average spread for the S&P 500 last year was 4.12 basis points, the same as last year. The quarterly average was 4.25 points in the first quarter, 4.12 points in the second quarter, 3.93 points in the third and 4.18 points in the fourth.
Smidcap equity trading costs for 2014 averaged 57 basis points, while large-cap equity trading costs averaged 27 basis points.
U.S. trading costs were below those in other major equity markets last year. In foreign markets, Canada had the lowest average cost at 33.3 basis points, followed by Europe ex-U.K. at 34.5 points; U.K, 42.6 points; Japan, 46.4 points; and emerging markets, 65.9 points. (Trading costs are associated with the region, not the constituents.)