TradingScreen designing pre-trade fixed income TCA tool
TradingScreen, the trading technology company, is designing a new transaction cost analysis (TCA) tool with a company in the fixed income market that will include pre-trade and post-trade functionality for FX.
TradingScreen is designing the product in partnership with the company, which has done extensive research into TCA for over-the-counter (OTC) fixed income product trades, says TradingScreen head of analytics Jon Fatica. The partnership will include the co-development of methodologies for the tool, as well as compiling a library of historical market data.
FX trades are carried out as part of the settlement process for OTC fixed income product transactions that involve the purchase or sale of cash instruments or securities from one territory to another.
Fatica says the pre-trade component of the fixed income TCA tool will be the first of its kind in the market.
He says the pre-trade component will be especially useful for a buy-side firm that only occasionally deals in securities products and who does not use trading analysis systems.
“Even traditional, post-trade TCA monitoring in the fixed income market is still immature because there is very little market data about the nature of OTC trades,” says Fatica. “The sell-side knows where the market is because they have got international networks that can compile this data that allows them to make markets.”
As a result, the buy-side of the fixed income market – especially small firms that only trade occasionally – will always operate at a disadvantage in the market to their counterparties unless they can have some form of pre-trade analysis, giving them what-if scenarios for every transaction, says Fatica.
“We can use this partnership to enhance our existing ability to conduct post-trade TCA on fixed income trading while also creating a pre-trade component,” he says.
In May, TradingScreen launched a real-time TCA tool for multiple asset classes, including FX, which provides graphical monitoring of executions for large orders.
The product includes a heat-map representation of TCA-related data, which the company says can help control costs across markets with fragmented liquidity, as well as providing a warning system for adverse market moves.
In June, TradingScreen announced a partnership with Zeno Consulting Group – which provides TCA to plan sponsors, mutual fund boards and other asset owners – to offer clients FX TCA tools and services.
The tie-up combines TradingScreen’s TCA capabilities in FX with Zeno’s consulting services in the fund management industry.
Fatica says the tie-up with Zeno was quickly successful, bringing in four new confirmed clients, 10 more that are set to become confirmed clients and 20 to 30 more in the pipeline that could sign-up soon.