Is there a UK/EU equivalent to the SEC’s 13F filing?
I am currently writing a paper for my master’s dissertation looking at the impact of HFT on stock price volatility and price discovery in the UK & European markets.
Previous papers which have focused on the US equities markets have sourced a lot of the necessary data from 13F filings. Can anyone point me in the direction of a UK/EU equivalent?
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First, there is no UK equivalent to the SEC’s 13F filing in which funds have to file their holdings on a quarterly basis here in the United States. In the UK, hedge funds do not have to file on a periodic basis at all. Instead, large shareholders are only required to flag long holdings that are greater than 3% of a company’s issued equity. This means that small hedge funds often do not register on the filing radar at all unless they invest in very small companies. Large funds on the other hand often leave a footprint and we can track their activities with ease (particularly when they are buying small and medium sized companies). Their investments in large cap companies, however, often go (legally) unreported and unnoticed because they do not trigger the 3% threshold. This is most similar to an SEC 13G filing (or 13D filing sans the activism) in the United States whereby a fund has to disclose after they have acquired a 5% or greater ownership stake in a company. We routinely cover 13G filings here at Market Folly and these UK filings can be regarded as their regulatory version of a 13G.
In the UK, once a fund crosses above 3% of a company’s equity in issue it has to report any further changes at 1% increments (regardless of whether it is a purchase or a sale). For example, if a fund moves from 3 to 4% of equity in issue or from 4 to 5, they must report. They must also report sales, for example, from 7 down to 6% until it gets below the 3% threshold where one final filing is required to acknowledge that the fund no longer has a concentrated ownership stake.
The additional filings made at 1% increments are interesting because the funds have to provide the trading date on which the threshold was crossed. This date can then be used to make a rough estimate of the price the fund was willing to pay for a company. Arguably, purchase price information is particularly useful if the fund being tracked is well known for excelling at fundamentally driven or deep value research. It is perhaps less meaningful if the fund follows momentum driven investment strategies such as those used by many Commodity Trading Advisers as these funds often move in and out of positions with much more alacrity and disregard for valuation.
Finally, just like in the United States, we can only provide information on a fund’s long positions in UK markets. Short positions do not have to be disclosed except if they are in financial companies or companies involved in rights issues.
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Thank you for your reply, it was very informative and useful.
The reason why I asked the question was because I am currently reading “The Effect of HFT on stock Volatility and Price Discovery” by Zhang (2010). He uses the data on institutional holdings and institutional turnover in order to estimate the HFT that takes place in the US capital markets at a quarterly level.
Do you know of any other approaches that have been used to estimate HFT in capital markets?
Again, I very much appreciate your comments,
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Last few numbers I recall seeing have ranged between 50% and 75% of all
trades are now going through HFT.
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As far as I know it is not 50% of all trades, but 50% of all orders, which is not the same at all.
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After a fund crosses the 3% threshold, and then lets say goes past the 4% mark, do you know how long after they have to file an update? Also, where can an investor find these files and more information on this topic? Thanks in advance for your help.
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