We participate in an anonymous peer group TCA database, to review our rankings on a wide variety of metrics and, as such, this is an effective tool for comparative work. We can compare our trading costs at the aggregate and/or regional level with others on a more realistic, difficulty adjusted basis.

As Head of Dealing, I receive a formal, tailored report on a quarterly basis that analyses related costs by specific fund management grouping. This uses multiple benchmarks including Next/Open (next price tick), Next/Open (difficulty adjusted) and Multi-day Volume Weighted Adjusted Price (until order end date). These detailed reports also include data concerning higher cost orders, %ADV, commissions and turnover. This quarterly reporting is augmented by similar tailored weekly /monthly reports sent as a PDF, containing trading and compliance related data, as well as online access to enable our review and interrogation of specific trades (including stock charts to review price evolution).

While, in general, I find TCA tools effective, it is fair to say most, if not all are not currently calculating benchmarks across all venues or from all of the Dark Pools of liquidity. Without doing so, buy-side benchmarks will be inaccurate to an extent, as they are missing a portion of the market. Unlike in the US, there is a lack of a consolidated tape in Europe; currently, TCA providers are basing their analysis on data largely from primary exchanges and the large MTF’s. To an extent also flawed data as – delayed reporting of up to 3 days – post MiFID, makes analysis problematic, especially for those that aspire to real-time analysis.

Effective, yes; perfect, no.

Dale Brooksbank, State Street Global Advisors, responds

TCA has been an integral part of the investment management process at State Street Global Advisors for a number of years. Increasingly, TCA is used on a number of levels – to scrutinise execution performance of orders, for individual strategies, analysis of our broker universe and ultimately, the performance of venues that brokers smart route to.

Whilst we believe that TCA is an effective tool to get an overview of execution performance, it is not without its challenges. As has been widely commented over the last 12-18 months, the fragmentation and inconsistency of trade reporting in Europe has made TCA a more resource-intensive necessity. The FSA guidelines in market watch 32 and the expectation of further guidance from CESR as part of MiFID 2 regarding trade reporting seems to be moving the TCA landscape forward, but broadly, the scarcity of consistent, reliable and high quality data means an element of subjectivity applies.

The benefits of TCA are well-defined and long, rich data sets allow effective conclusions to be drawn; benefits that we have found can permeate their way throughout our investment organisation, improving both execution performance and drive the investment process itself. FIX Tag 30 allows us to monitor venue execution in real time in the very short term, and a rigorous investment process that reviews longer data sets allows us to adapt strategy to improve execution results according to market dynamics.

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