TCA

Finance Hive Insights

Welcome to our Insights page. Here you will find a selection of interviews, reports and surveys curated for our members, by our members.

A checklist of the key findings from a recent meeting of Equity trading heads:
  • TCA data should be used over time to capture trends and presented in the right way to add long term value across all teams & drive performance. Deviations whether underperforming or overperforming should be flagged and encourage deeper investigation into orders, dealers, brokers to understand the key drivers & what steps should be taken.
  • The provision of adaptable and scalable reports along with knitting orders together is key when selecting a TCA provider. Challenge providers to develop solutions fit for purpose for your business & requirements at proof of concept stage.
  • Having one EMS provider with TCA tool built in can be more seamless, as there are less data issues with everything centralised. The ability to slice and dice to report on PM strategies, brokers, trades is essential to extract the value & insights needed to improve.
  • TCA by channel provides the most useful insights. Low touch trades have more commonality making comparisons and benchmarks more robust meaning you can gain a strong sense of performance around latency, venues & routes to market. High touch trades are typically more complex & more about the PM style & strategy across the long term, so comparing execution costs can be a difficult argument & a thematic approach is needed.
  • Many smaller buy side firms have limited data & lack quant expertise – having trade analysts and quant expertise will be essential for trading teams in the future.
  • Trading analysts cannot be a small bit part role as they will care less for the data – it needs to have an owner who bridges the gap between execution team & portfolio managers.

Surveying the TCA Provider Landscape – requests from the buy side

Report

We recently asked a group of 60 European Heads of Equity Trading what their number 1 investment area was looking to 2021, with TCA joint first. How does this compare with North American desks?
TCA22%
22%
Scaling up automation22%
22%
Real time venue analysis13%
13%
Using AI/machine learning13%
13%
Next gen algos9%
9%
Pre-trade analytics4%
4%

Spotlight: We caught up with Martin Hellmuth, Investment Policy Analyst at RBC Global Asset Management who shared the value they receive as a result of having two TCA providers…

One of my responsibilities as manager of the UK and Asia Investment Policy teams is to oversee our best execution capabilities and of course TCA is a huge part of that. I believe that if applied in the right way, and with the right data, you can not only monitor the historical performance of various brokers but also provide the traders with valuable insights on who to trade with in future.

The two different TCA providers offer us different benefits and insights but can also be used in conjunction with one another, as a sort of data validation exercise. We use ITG predominantly for its proprietary Post Trade ACE benchmark which takes into account several factors, such as momentum and sector performance, and provides a performance figure versus the benchmark which is only beaten by approximately 50% of ITG’s clients.

LiquidMetrix is able to provide us with detailed venue analysis (we can hold brokers accountable for their order routing practices) and we can look at which brokers are sent the most difficult trades and how they perform versus peers.

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