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The term ‘TCA’ has now become so common across the industry, and some would argue commoditized, that its value is in danger of becoming misunderstood. While most buyside firms use some form of broker post-trade analysis to measure how they’ve performed against their benchmark, the firms who are out-performing versus their peers are using a broader approach of pre-trade, real time and post-trade analytics to answer questions about how and why trading costs are incurred, and what actions can be taken to reduce them.
Our Global Cost Review report for the Fourth Quarter 2013 studied global commissions and implementation shortfall costs for the period.
ITG Financial Engineering has recently completed its R&D work on international stock specific intraday volume profiles, extending its robust estimation methodology to common stocks and several other security types to cover more than 50 markets around the world.1 The intraday volume profiles, which include the estimated percentages of the daily volume to be traded in each 15-minute interval of the continuous trading session and at the and closing call auctions, are estimated for individual securities traded on each market and can be used for efficient execution of large orders.
Please find this article referenced in the Wall Street Journal.
Responding to many client requests, the FX team at ITG Analytics reviewed trade data surrounding the WM/Reuters London Closing Spot Rate Service (“the fix”). By observing the factors that influence trading costs using ITG TCA® for FX’s rich quote data we found trade patterns that were unique. Consistent with academic literature1,we show that volume and volatility around the fix spikes and the spread costs tighten temporarily. In addition, we see mean reversion of the FX rates on days when there is substantial price pressure shortly prior to the fix. Our analysis does not prove the allegations of manipulation brought about by some market participants.
This piece can also be found in the Summer issue of The Journal of Trading.
Shortly after the market opening on August 1st 2012, a single server owned by Knight Capital flooded the market with persistent buy and sell trades as it attempted to fill 212 small customer orders in 154 U.S. stocks. According to the SEC press release, the surge of trading activity caused by a faulty code deployment resulted in execution of 4 million child orders for almost 400 million shares during the first 45 minutes after the market opening. For 75 of those stocks, Knight’s executions exceeded 20% of the trading volume and contributed to price moves over 500 basis points (bps). For 37 of those stocks, the price moved by more than 10 percent, as Knight’s executions constituted more than 50% of the trading volume. The price impact of Knight’s trades resulted in large unwanted long and short positions and an estimated $461 million (mln). loss as Knight attempted to close these positions. As a result, Knight was forced to seek funding from external investors to stay afloat.
I recently received my copy of the Winter 2014 Journal of Trading. Quickly scanning the journal’s cover, I began flipping through to an article on real-time TCA visualization. I stopped, when I came across the title which I reuse for this comment. The Journal piece is an edited manuscript of a panel session of the same title held during a conference, organized by Robert Schwartz of Baruch College in New York. The participants, led by Andy Brooks of T. Rowe Price Associates, are well-known in the industry, and I recommend a read by anyone who did not see that crew in action.
This piece was originally published in Best Execution magazine.
On the 14th January the European Parliament and Council of Ministers ﬁnally agreed a new directive to update rules for markets in ﬁnancial instruments (MiFID II). Rob Boardman, CEO of ITG Europe asks whether it was worth the wait?
Market participants do not need to be told that they are working in an era of Big Data. They experience it every day. However, developing an appropriate response is going to change the daily experience in a number of important ways. The relationship with technology will inevitably change. Internal relationships will be altered. And analytics will dominate any list of required capabilities.
In Asia's equity markets, liquidity flat-lined through the fourth quarter of 2013 according to ITG's Asia Pacific 'Liquidity Barometer'. This tool is a measure that combines turnover, spreads and volatility that was launched in 2008 with a notional value of 1,000.
Listen to a special briefing by Duncan Higgins (Head of Electronic Brokerage, London), Juan Pablo Urrutia (European General Counsel, London), and Jamie Selway (Head of Electronic Brokerage, New York) discussing MiFID II, with a focus on the European Parliament’s recent political agreement for the Level 1 Text. Our experts discuss ITG’s position, provide context on what it means for clients, and answer questions.