TCA is undergoing a fundamental shift. No longer confined to post-trade evaluation, TCA is being reimagined as a key input across governance, broker oversight, and real-time decision-making. At our most recent Digital Café, leading buy-side traders shared how they are embedding TCA deeper into their workflows – despite ongoing issues around data fragmentation, product complexity, and cross-asset consistency.
Here’s what the community shared…
TCA as a Governance Tool
TCA is now playing a more active role in firms’ risk and compliance functions. Rather than simply validating performance retrospectively, it’s being embedded into real-time and periodic surveillance processes.
This enables teams to flag trading anomalies, benchmark outliers, or deviations from expected behaviour – supporting faster escalations and improved accountability. However, there’s widespread consensus that TCA can’t work in a vacuum. Firms are pairing TCA outputs with logic-based rules engines and secondary metrics (e.g., market impact models, quote rejection rates) to build a more nuanced understanding of execution quality.
Community insight: “TCA is evolving into a control check. It’s not just a data point – it’s an alert system for us.”
Using TCA to Educate Portfolio Managers
As part of the governance evolution, many firms are introducing TCA into portfolio manager education. Execution quality reports are being tailored to help PMs understand how their decisions – timing, urgency, order size – directly influence outcomes.
The aim isn’t punitive. Instead, it’s about building a collaborative feedback loop between trading and portfolio management, enabling more informed pre-trade decisions and helping prevent issues like excessive urgency, poor timing, or over-trading. The challenge remains: finding the right level of detail for each audience. Some PMs want deep analysis, others prefer executive-level summaries.
Community insight: “The feedback loop is invaluable. But we’ve learned to scale the analysis to suit each PM – we don’t want to overwhelm them.”
Broker Governance: Time for Structure
Broker and algorithmic strategy oversight is becoming more structured and data-led. In the past, onboarding and offboarding decisions were often based on anecdotal experience or subjective judgement. That’s changing.
Firms are building formal evaluation frameworks that include TCA metrics, hit ratios, information leakage, algo responsiveness, and post-trade slippage. These frameworks help ensure broker and algo selection is more consistent, transparent, and accountable – especially important as broker lists contract and algo offerings become more sophisticated.
Community insight: “Structured governance keeps performance transparent – and forces brokers to bring their A-game.”
Start Simple: Defining Benchmarks
When it comes to setting up TCA programs, many firms warned against over-engineering too early. A shared message: get the basics right first. That means starting with clear benchmark definitions (arrival price, quote mid, decision price), consistent timeframes, and a simple understanding of what success looks like.
Without this clarity, TCA becomes subjective, and performance evaluations can lead to confusion or pushback. Overly complex metrics also risk derailing stakeholder engagement, particularly with PMs or compliance teams less familiar with trading nuance.
Community insight: “You’ve got to define the goalposts before you kick the ball. Simplicity builds confidence in the process.”
Custom Algo Settings: The Hidden Headache
The ability to tailor algorithmic trading strategies – adjusting urgency, child order types, or slicing logic – is great for execution precision. But it comes at a cost. Customisation makes performance benchmarking much harder, as no two algo runs are identical. This makes it difficult to compare providers or even measure performance consistently across desks.
Some firms are starting to strip out common variables and normalise performance by strategy type or urgency level. Others are leaning into execution consultants or in-house analytics teams to standardise comparison models.
Community insight: “We love customisation – but it creates blind spots when comparing outcomes.”
FX Forwards and Swaps: Chasing Transparency
In the FX world, forwards and swaps – particularly those tied to fixing mechanisms – continue to suffer from limited transparency, especially around forward point pricing. This makes meaningful cost attribution and performance analysis extremely difficult.
While automation and STP are seen as potential game-changers, they remain underutilised. Partly because of infrastructure limitations, but also because of internal barriers like legacy workflows and fragmented counterparty data.
Community insight: “We’re still flying half-blind when it comes to forward point transparency. That’s a big blocker for analysis.”
Fixed Income TCA: Still Catching Up
TCA for fixed income, particularly in less liquid or portfolio-traded instruments, continues to lag other asset classes. The difficulty lies in the nature of the market: trades are often bundled, opaque, and negotiated bilaterally, with limited real-time price discovery.
However, the market is shifting. More vendors are building pre-trade cost estimation tools, and buy-side firms are increasingly trying to integrate these into their workflows. Adoption of tools like MarketAxess CP+ and Bloomberg’s TCA offering is growing, although stitching these solutions into front-office and compliance systems remains a work in progress.
Community insight: “Fixed income is messy – but we’re making headway. Portfolio trade analysis is the next big unlock.”
The Big Picture: What’s Next for TCA?
Across all discussions, one truth became clear: TCA is no longer a ‘nice to have’. It’s central to control, feedback, and strategic execution. But if it’s going to reach its full potential, firms must overcome long-standing blockers:
- Data standardisation and access
- Integration across asset classes and platforms
- Education and stakeholder alignment
The buy side continues to lead the evolution – pushing for smarter, more transparent execution in even the most challenging markets.
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