Latest Blog Posts

How Analytics Can Help Make the Most of Asian Liquidity

Erin Stanton, ITG

Aug 29, 2014
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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. read more


Gary Stone, Bloomberg Tradebook

Aug 27, 2014
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There are “gray” areas in the implementation of Regulation NMS. Many of these gray areas arise because Reg NMS Rules 610 and 611 are intertwined. For example, a gray area of rule 610, Access to Quotations, is treatment the prohibition of locked markets and the “replenishment” from the “Reserve” portion of an order as part of Rule 611, the Order Protection Rule. Reg NMS and the technical implementation guidance literature were mainly concerned about a market venue executing the Display AND Reserve portions of a large incoming order. read more

The Future of Best Execution

Steve Grob, Fidessa

Aug 18, 2014

I was chatting with a few work colleagues last Friday about best execution and derivatives. They confidently asserted that without real fungibility (i.e. the ability to trade the same instrument on different venues), price comparison is not possible and so any notion of best-ex was pretty meaningless. By coincidence, I was later looking at the wording in the best-ex policy of my own broker (and yes, it was a slow afternoon). Interestingly though, it reminded me that best-ex is a much broader concept than just price comparison – it needs to take into account the liquidity, tradability and reputation of any venue, together with an assessment of my own sophistication/naivety. read more

Pre-emptive compliance

Christian Voigt, Fidessa

Aug 14, 2014

MiFID II brings with it some significant changes to the Systematic Internaliser (SI) regime. Most importantly, ESMA will introduce quantitative thresholds that determine when a firm is obliged to obtain an SI licence. Given that these thresholds are based on average values across the previous quarter, it all looks pretty sensible and most likely to impact only the larger firms. But on closer inspection things are rather more complicated. Considering that the SI test applies for each instrument separately, and trading volumes can fluctuate massively, it’s likely that even a small brokerage firm will execute a few different stocks every quarter that force them into the SI regime. read more

If it ain’t broke, break it

Steve Grob, Fidessa

Aug 12, 2014

I was hoping to enjoy the last few weeks of summer in relative peace, but it seems that another regulatory storm is brewing. This time it’s over the unbundling of research and it all stems from ESMA’s interpretation that, under MiFID II, research is an “inducement to trade” and therefore cannot be paid for out of commissions. This threatens to completely derail the economics of trading and reduce the quantity and quality of research available (and the resultant investment decisions). read more

Data jigsaw

Christian Voigt, Fidessa

Aug 07, 2014

Under the European Short Selling Regulation (SSR) uncovered short sales are banned and investment firms are required to track their net short positions and report them to relevant authorities/the public if they breach certain thresholds. Implementing this is already quite a tall order, but things could potentially become even more onerous in light of the requirement to flag short sales in transaction reporting outlined in MiFIR Article 26. As an unintended consequence, might we see a requirement for brokers to aggregate their net position across the whole firm in real-time throughout the day? Traders may know whether their own desk or account is going short, but how do they know whether the reporting firm in aggregate is going short? Some respondents to the MiFID II/MIFIR discussion paper suggest the short sale flag should be applied per trading book or account – a reasonable proposal considering implementation efforts. read more

Driving Competitive Advantage Through FX TCA

Michael Sparkes, ITG

Aug 04, 2014

“The most valuable commodity I know of is information” - to quote Gordon Gekko from the 1987 movie classic Wall Street. This line has never been more significant than in today’s data-fuelled financial markets, where detailed analysis of information can provide that all important competitive edge – both now and in the future. To achieve this, firms are looking towards Transaction Cost Analysis (TCA), which enables them to reduce costs and hone trading strategies. This isn’t new. read more

Volume Volatility Relationship and Trade Cost of ETFs vs Common Stocks (Part 2)

Jingle Liu

Jul 25, 2014

Volatility and Volume The uniqueness of ETFs is also evident in the volatility-volume relationship. To study this relationship, we compute the linear regression between log⁡(spread × √ADV) and log⁡(price × volatility), where spread and price are thrown in to normalize securities of different scales. For US common stocks (black dots in Figure 1), we find that the regression slope is 1.03 with R2 = 0.72, which implies: price × volatility ∝ spread × √ADV This result is in line with the view that the trading volume and spread is the major source of volatility and that the volume plays the role of time in random walk. read more