[ 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 ]
elements which are based on normal market conditions or our own historic trading data ,” says Invesco ’ s Squires . “ Then there ' s a sense of what ' s actually happening in the market at the particular moment , where trader instinct can override the data-driven , backward-looking recommendation . The point being that the signal in an EMS to make that recommendation , is looking at historic TCA . TCA is really gauging whether the previous way you traded it worked well or not .”
Building on this , TCA is able to provide insights into who has been traded with , how it was traded , and the costs associated with that trade , while also providing potential new techniques to tackle that trade in the future .
“ It ' s actionable in the sense that I ' ve analysed data , drawn conclusions from that and then used it to perhaps make a change in how I ' m segmenting orders , how I ' m routing orders and who I ' m giving those orders to ,” says O ’ Connor .
Ultimately , it comes down to how firms are using the data . “ Gone are the days of people just looking at implementation shortfall and VWAP ,” emphasises Richter . “ There is a need to understand direct market impact , reversions , liquidity vs aggressiveness , adverse tick activity etc . Using these smarter metrics where necessary ,
provides a much more valuable analyses .”
To make trade analytics more actionable , we see increasing collaboration between traders and data scientists and / or research analysts . The core benefit of the these typically separate teams communicating with one another is helping shift data into something that is more substantial and useful in the grand scheme of trading .
“ If you look at equity TCA and you look at all of the data points that are available , it can be overwhelming to look at and you ' re not really sure how to get those actionable insights out of that analysis . If you have an analyst or data scientist , a team of people that are able to disseminate that
“ It ' s not autopilot - I ' m not bypassing the trader - I ' m instead enabling the trader with better information than they had previously .”
ERIN STANTON , GLOBAL HEAD OF PORTFOLIO AND TRADING ANALYTIC CLIENT SUPPORT AT VIRTU FINANCIAL
32 // TheTRADE // Q1 2024