Enhance Alpha through Customized Cost Analysis
While high-speed algorithmic trading has been grabbing the headlines there has been another technology evolution occurring, one that leverages the same state-of-the-art, high-speed computer and software technologies. As a corollary to low-latency algo trading, market participants from quant traders to portfolio managers are focused on overall trade performance through Transaction Cost Analysis (TCA). These sought-after efficiencies create the incentive to invest in technology for TCA simply because it can generate alpha by exposing, and ideally lowering, the cost at which you buy and sell. This has pushed best execution beyond price to the overall understanding and management of execution costs and venue performance.
OneTick is the ideal platform suited for custom TCA analysis in real-time, intra-day and end of day. It provides a better context behind each transaction, and ultimately helps traders fine-tune their strategies. TCA relies on three fundamental components: data management, analytics and visualization. These are needed for both traditional post-trade TCA and intra-day, real-time cost analysis.
Technology is reshaping the trading landscape as algorithms and low-latency analytics continue to dominate. But such is not the sole domain of high-speed traders. As the buy-side becomes more discerning, demanding improved quality of execution, the sell-side is forced to up the ante, offering expanded services to better understand and manage the trade lifecycle. Complex event processing (CEP) and tick data management are the consummate tools that can easily be recast, molded to unearth trade performance, a goal that is central in the investment process as liquidity continues to be fragmented and fleeting. Now uncovering the performance of trading behavior through customized, personalized transaction cost analysis is a critical component to any investors’ profitability.
Data management for TCA is about bringing together disparate data types. It starts with consuming market data – trades and quotes which come in many shapes, sizes and encodings. However, tick data is usually derived from many sources. There are 13 major exchanges in the U.S. alone and 20 across Europe and Asia. The determinants of price discovery, volume, and trading patterns define the structure unique to each market, asset class and geography influenced by participants and current regulation.
Analytics is central to TCA ’s value. Increasing competition and thinning margins has heightened sensitivity to trade costs and has brought into sharper focus the need for versatile tools for analytical TCA. Customizable analysis offers the flexibility to show order and fill performance against a variety of price benchmarks by venue, industry, algorithm or sector. The analysis can then provide insight into the best and worst execution performance.
Real-time TCA provides traders with information on costs, quality and potential market impact as it happens, where analytics become actionable information at the point of trade. Determining these metrics on an internalized basis offers the ability to adjust an algorithm’s behavior in real time. Execution strategies and routing logic can be adjusted intelligently in response to outlier conditions; either aggressively or passively in reaction to market conditions or broker behavior.
- Built-in high precision analytical library for TCA analytics and market price benchmarks
- Disparate data is normalized and cleansed (Deals, Quotes, Books, Orders, Executions)
- Real-time stream processing engine, historical time-series database and visual dashboards
- Flexible choices for building analytical models for execution/broker performance, market impact, etc.
- Small footprint Architecture, simplified/extensible development methodology
- Unique, detailed and precise analysis on trading activity in real-time and historic
- Visualize data and analytics from multiple sources (databases, trading platforms, etc.)
- Enhanced insight into execution quality
- Comprehensive solution for all data analysis needs
- Low Total Cost of Ownership
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