Sophistication of TCA application rises among asset managers

Press Releases

Sep 10, 2024

LONDON, Sept. 10, 2024 /PRNewswire/ — Asset managers are increasingly using Transaction Cost Analysis (TCA) to drive insights beyond traditional uses as well as expanding the scope of asset classes covered, a report from Acuiti has found.

TCA is a crucial tool for asset managers that has risen in importance as costs have escalated, regulatory requirements have been imposed and increased competition has put a spotlight on execution efficiency.

In order to better understand how asset managers are adapting their approaches to TCA, Acuiti partnered with Abel Noser Solutions, a Trading Technologies (TT) company, to conduct a study into how firms are evolving their strategies. The whitepaper, The Growing Sophistication of Transaction Cost Analysis, is based on a survey of senior executives at 64 asset management firms across the global market, released prior to TT’s second annual TT Connect event in London on Thursday: Unlocking Profit with Data & Analytics.

Over the past decade, approaches to TCA have evolved from a simple measurement focused on basic metrics such as commissions and spreads to a holistic view across multiple metrics, including market impact and a broader range of inputs.

The study found that 65% of respondents to the survey had increased the sophistication of their analysis of TCA data over the past five years.

Use cases for TCA among asset managers have proliferated in recent years with applications now including risk management, alpha creation and marketing to investors in addition to more traditional use cases, such as internal compliance and decision making on broker selection.

Asset managers are also taking a more sophisticated approach to how TCA is embedded within their workflows. This is, however, an ongoing process for firms. For example, while 87% of respondents recognised the importance of integrating TCA into their OMS/EMS, less than half currently had that functionality.

Challenges still remain for firms, with 94% reporting that poor data quality hampered their ability to effectively measure TCA. Other major challenges firms faced were seen most in measuring liquidity and establishing the market impact of a trade.

As the use cases of TCA increase with the advance of technology solutions to measure and analyse the data, so too do the asset classes that are in scope for TCA. TCA is most mature and widely used in equities, where data availability and standardisation are the most advanced.

However, this survey found that asset managers are increasingly deploying TCA in other asset classes outside equities.

Asset managers taking part in the study said they commonly applied TCA to fixed income and equity derivatives. Less commonly, respondents also applied TCA to commodities and listed and OTC fixed income derivatives.

Peter Weiler, TT’s EVP Managing Director, Data & Analytics, said: “The findings in the study correlate with our own experience at Abel Noser and TT in which asset managers and other clients are looking to increase the applications of TCA across both asset classes and the trade lifecycle. This is evidenced in part by the demand for our new listed derivatives solution, TT Futures TCA, which was released in June.”

“Over the past decade, TCA has gone from a retrospective, compliance-focused process to one in which valuable insights can be driven across the trade workflow,” says Ross Lancaster, Head of Research at Acuiti.

“As firms find more use cases for TCA, the need for high quality, real-time data also increases, which is causing challenges for some firms. However, for the firms that can achieve data quality across asset classes, there is significant value to be gained both in terms of trade optimisation as well as in alpha generation.”

Download full report here: https://www.acuiti.io/the_growing_sophistication_of_tca/

Taking place on the afternoon of 12 September at the Andaz London Liverpool Street, TT Connect: Unlocking Profit with Data & Analytics is aimed at helping senior-level leaders from the international trading community discover how trends in artificial intelligence (AI), compliance, regulatory technology, data and consolidation will impact the capital markets. The event featuring a roster of expert speakers and panelists is open to members of sell-side and buy-side firms with complimentary registration.

About Acuiti

Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.

About Abel Noser Solutions, a Trading Technologies Company

Abel Noser Solutions has long been respected as a leader in the campaign to lower the costs associated with trading. The company is the industry-leading provider of transaction cost analysis with over 350 global clients subscribing to its multi-asset TCA and compliance products directly or through a network of resellers, distribution partners and strategic alliances. In 2022, Abel Noser was named the Top “Best-in-Class” Vendor in the Global Multi-Asset Class TCA Aite Matrix Report. Learn more at www.abelnoser.com.

About Trading Technologies

Trading Technologies (www.tradingtechnologies.com) is a Software-as-a-Service (SaaS) technology platform provider to the global capital markets industry. The company’s award-winning TT® platform connects to the world’s major international exchanges and liquidity venues in listed derivatives alongside a growing number of asset classes, including fixed income, foreign exchange (FX) and cryptocurrencies. The TT platform delivers advanced tools for trade execution and order management, market data solutions, analytics, trade surveillance, risk management, clearing, post-trade allocation and infrastructure services to the world’s leading sell-side institutions, buy-side firms and exchanges. The company’s blue-chip client base includes the Tier 1 banks as well as brokers, money managers, hedge funds, proprietary traders, Commodity Trading Advisors (CTAs), commercial hedgers and risk managers. These firms rely on the TT ecosystem to manage their end-to-end trading operations. In addition, exchanges utilize TT’s technology to deliver innovative solutions to their market participants. TT also strategically partners with technology companies to make their complementary offerings available to Trading Technologies’ global client base through the TT ecosystem.