Technology is making a sweeping transformation in trading styles as the accelerating use of algorithms creates a more competitive environment for all market participants. Tighter spreads, diminished liquidity and increased volatility are re-defining global markets and thinning margins.
This translates to the increased awareness of trading costs as participants look to squeeze alpha out of a diminishing pot. Whether you’re an asset manager, an institutional investor, a quant researcher or an executing broker, sought-after cost controls create the incentive to invest in advanced technology for Transaction Cost Analysis or ‘TCA’. Essentially a collection of comparisons between various market benchmarks and traded prices to determine whether the spread between them is high or low at the time of order, TCA can generate alpha by exposing, and ideally lowering, the cost at which you buy and sell. Results from the analysis are used to fine tune the trading process, compare venues, and provide clients desired reports and dashboards.
Benchmarks provide the formal metrics of market conditions to quantify costs. They offer baseline measurements throughout market history, across the trading day and at the time of execution. They include price metrics such as open, high, low, close and volume-weighted-average-price as well as liquidity metrics of the order book.
OneTick TCA, an enterprise platform, offers a set of market benchmarks across global equity and futures markets. This starts with tick-by-tick trade, quote and order book history and boasts over 20 price and volume metrics. Along with global benchmarks, OneTick TCA also includes a collection of best-practice methodologies to determine the effectiveness of your trading.
OneTick TCA provides the tools to …
- Spot outliers in your trades by measuring slippage against price benchmarks such as VWAP, Bars and Beta
- Measure participation rates by venue and across venue against stated goals
- Compare performance vs. volume benchmarks to determine the effectiveness of capturing the visible liquidity at each price level.
- Measure market impact or the cost of demanding liquidity by understanding quote fade across venues
- Quantify the opportunity cost of not trading as a justification to tune algo aggressiveness
OneTick TCA is a hosted platform built upon OneTick’s time-series database, analytics and market history to service the demanding and varied needs of both buy- and sell-side institutions. To learn more about OneTick TCA, download a product sheet or request a demo today.
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