The use of third-party transaction cost analysis (TCA) has become part and parcel of the way buy-side firms assess liquidity providers and the effectiveness of their execution algos.
On the post-trade side, this focuses on the cost of execution and drivers such as information leakage from the LPs. On the pre-trade side, it’s more concerned with forecasting the expected performance of the algo versus execution, and how this could be influenced by factors such as currency pair, trading venue and speed.
It is increasingly an expectation of buy-side clients that their sell-side counterparties should plug all this data into third-party TCA providers like BestX and Tradefeedr. As a result, a lot of buy-side trading decisions are being shaped by the data they get from these vendors.
Communal transaction cost analysis (TCA) data is often…
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