[ I N D E P T H | T R A N S A C T I O N C O S T A N A L Y S I S ]
that answer that question and you can ' t capture it all in data ,” argues Paul Squires , head of trading , EMEA and APAC equities at Invesco .
“ There ' s often that initial resistance but we ’ re moving to a place where traders are now , for the most part , much more engaged with it . Traders look at data and deploy it in a much more meaningful way in terms of their day-to-day job , rather than a monthly compliance check that you need to complete – TCA is becoming something that is much more embedded in trading decisions .”
TCA is evolving towards something more proactive , utilising predictive analytics that enable market participants to anticipate and mitigate execution risks , optimise trading strategies , and help to generate alpha .
The data is increasingly being used as more than a simple measurement , but instead is being applied to make better informed trading decisions .
“ Some of this has been regulatory driven , of course , but there remains the quest – and rightly so – to utilise TCA for actionable insight and additional alpha , with the users getting smarter and smarter in how they approach this ,” says Michael Richter , global head of trading analytics at S & P Global Market Intelligence . “[…] There seems to be more synchronisation around the analysis internally than there ever was .”
Instead of simply being a report on outcomes , TCA is now using real-time data to provide organisations with methods to achieve better outcomes . Back testing with historical data is also being used to identify where a trading decision could ’ ve been changed to reduce costs while still achieving trading objectives . And these reports are being shared at investor level .
“ We ' ve gone from providing TCA because it ' s a need and a requirement for a regulatory purpose , to actually looking at the TCA to drive future trading decisions and to drive an improvement in the overall outcomes of trading using the data as the insight for that process ,” states Victoria Bryan , vice president , lead data analyst for capital markets at Northern Trust .
Value When it comes to TCA , we ’ re talking about measuring a theoretical and implicit cost of trading which affects performance . By being able to measure that and then – in the best case – improve on that , a real measurable value linked to TCA is established .
“ The value of TCA is you ' re spending time thinking about your investment process , how to clean and capture that data , how to communicate that data back to end users in a way to help them understand markets better , understand their counterparties better , and understand their trading workflows better ,” says Kevin O ’ Connor , head of analytics and workflow technology at Virtu Financial .
TCA is only as valuable as the output , and it needs to be incredibly accurate . The interpretation of TCA requires people to know exactly what it is that
28 // TheTRADE // Q1 2024