The Top Three Transaction Cost Analysis System “Must Haves”
Transaction cost analysis (TCA) seeks to shed light on how fees and market impact add to the cost of buying or selling a particular security. These costs take the form of higher commissions to a particular broker or information leakage and liquidity issues, causing wider spreads between bids and offers, and price movement.
Increased regulation, compliance oversight, lawsuits, and the migration of OTC securities to electronic execution are just a few of the industry trends that are driving the buy side’s widening interest in TCA. But, these “it’s important to eat your vegetables” reasons aside, the best argument for adopting TCA is the fact that it helps generate alpha, by lower the cost at which you buy and sell securities increasing total returns.
As the buy side moves to adopt TCA tools more proactively, there are three main things that firms should look for when assessing systems: (More …)
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