The latest data from Credit Suisse indicate volatility could continue to be a key theme in financial markets. According to Credit Suisse analyst Ana Avramovic, transaction costs and investor fears have been on the rise recently.

Not only is the Credit Suisse Fear Barometer Index elevated, market “fragility” is also currently higher than normal. Credit Suisse uses its Transaction Cost Index as a measure of fragility. The Transaction Cost Index incorporates shortfall costs from trade data that is adjusted for trade characteristics such as aggression/size and market conditions like volatility.

The recent rise in market transaction costs indicates that there is little depth in the market these days.

“With less depth, a comparable order will have to go through several layers of the book to complete, resulting in larger impact and, potentially, larger price swings,” Avramovic explained.

She noted, however, that elevated CSFB and Transaction Cost Indices don’t always guarantee…

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