LONDON Feb 22 The premium that institutional
investors pay to trade emerging markets stocks rather than their
peers in developed countries narrowed markedly in 2016, a
Greenwich Associates survey showed on Wednesday.
Stocks in emerging markets on average tend to be tougher and
more expensive to trade in and out of due to regulatory
barriers, lower trading volumes relative to stocks in the United
States, Japan and Europe, and currency fluctuations.
While commissions that institutional investors have to pay
to trade emerging stocks remain higher than those in developed
markets, the premium shrank to 43 percent in 2016 compared with
56 percent in 2015, according to Greenwich associates, a market
The rising popularity of exchange-traded funds (ETFs) could
be one reason for the narrowing premiums, Greenwich said.
"This trend suggests that emerging markets are becoming more
accessible for equity traders, which could be a result of the
ETF boom," said William Llamas, Associate Director at Greenwich
ETFs have allowed both institutional and retail investors
the opportunity to invest in emerging markets, where size and
access barriers previously existed, the firm added.
Overall, average commission rates to trade U.S. stocks
through a traditional broking firm were about 12 basis points
and 14.9 basis points in Europe in 2016. The comparable rate for
emerging market stocks was 22.3 basis points, Greenwich said.
(Reporting by Vikram Subhedar)