Ensure Best Execution with Real-Time Transaction Cost Analysis
Transaction Cost Analysis (TCA) lies at the very heart of the best execution obligation and is a tool that no intermediary and market participant can ignore. Faster trading technology, low latency infrastructure, fire-hose market data volumes and high frequency traders have made best execution and alpha capture ever more elusive for institutional investors and buy-side firms alike.
financial visual analysis and high performance tick history databases working with Complex Event Processing (CEP) engines. Traders and managers must analyze massive tick, quote and trade history data sets. They must quickly find trends, outliers and clustering for historical analysis and real-time monitoring applications.Truly effective Transaction Cost Analysis requires a combination of
Optimized deployment strategy
In a typical implementation, Panopticon provides the visual data analysis tools while other specialized systems provide the heavy lifting of processing and merging the transactions with the associated tick history. The combined platform allows you to look back and highlight areas of under and over performance within the historical transaction record, including the correlations between instrument, industrial hierarchy, algo strategy, and venue.
The analyst can also drill down into particular orders with unusual market participation values and view the fill profile and prices achieved mapped against the underlying exchange pricing. You can switch to analyzing the data in real time and monitor the aggregate position of all trades by industry, venue, buy/sell, and strategy as orders occur and are gradually filled through individual child orders. This highlights the variance to expected performance.
Leverage the capabilities of the right back-end systems
Panopticon supports a wide range of back-end systems to support real-time TCA, including:
- Kx Kdb+ tick databases
- OneTick CEP and tick databases
- Oracle CEP
- StreamBase CEP
- SAP Sybase Event Stream Processor
- SAP Sybase IQ column-oriented databases
- Thomson Reuters Velocity Analytics
Optimized TCA for buy-side applications
Analysts compare an actual execution against a benchmark such as VWAP. The buy-side can measure the performance of individual brokers and various venues for best execution. TCA can accurately measure the costs incurred by trading strategies to show a different side of their profitability. This transaction cost decision analysis leveraged by buy side trading desks can improve their ability to capture alpha. But there is another angle, specifically intra-day or real-time cost analysis. That of measuring trade cost performance as it happens not just at the end of day.
Real-time TCA is an effective competitive weapon to outpace the market, with it you can continuously monitor execution price against arrival price and recalibrate benchmarks. The continuous analysis of executing orders showing realized and unrealized P&L can indicate in real-time those implicit opportunity costs, the impact of market forces however volatile they may be on any given day. The insight of real-time costing analytics for order execution provides traders the decision-making tools to be more profitable. Trading strategies can be adjusted intelligently, either aggressively or passively to respond to market conditions.
Analyze orders and fills across venues, industries, and algo strategy
Dashboards built with Panopticon technology display all TCA data. Analysts can zoom in to see as much detail as needed, go back in time as needed, play tick data forward at any speed - faster or slower than real-time - and obtain an at-a-glance understanding of how well their traders are performing against benchmarks and each other.