NEW YORK (December 12, 2011) OpenTCA, a consortium of major sell-side firms and TradingScreen, the premier provider of multi-broker and multi-asset class execution management systems (EMS) to the buy side, today announced the results of a consultation process for the industry to potentially move towards universal standards in their delivery of transaction cost analysis (TCA).

The results from industry members on the buy side, sell side, as well as TCA consultants, suggest that providers, which include brokers and independent third-parties have work to do to meet today’s expectations, let alone a more demanding future requirement set. The average score out of ten (fully satisfied) found that users awarded their providers with only 5.36.

“The results show that almost everyone expects more sophisticated TCA in the future. More than 90% of respondents were clear on that,” Jon Fatica, Head of Analytics at TradingScreen, said. “Clearly, the founding brokers, and a second wave of other major brokers, have committed to improving client results using TCA practices. They appear to be eager for means to validate their performance analyses, particularly as it relates to the variety of instructions that they receive from clients.”

Additional survey findings include:

• There was general agreement on the broad themes of the standardisation approach with over 85% of respondents citing transparency as essential or very important. Statistically robust was the second most important criteria at over 80% and consistency was third with 75% citing essential or very important.
• Implementation shortfall remains the most significant measure of transaction costs for respondents with 83% agreeing or strongly agreeing. However, reversion measurement was also identified as an important consideration for both the buy- and sell-side, at 75%, in order to highlight market impact. The often derided volume weighted average price (VWAP) was also a central benchmark at over 65%.
• In terms of some of the specific recommendations, there was generally strong support shown for mid quote prices to be used as the basis for point-in-time benchmarks (over 65% agreeing or strongly agreeing)
• High levels of support (63%) were also revealed for the use of the Bloomberg unadjusted AQR as a basis for measuring VWAP.

“What the process has shown is that there is a desire for more transparency and consistency within TCA and general acceptance of specifics in some areas,” concluded Fatica. “What we need now is a broader embrace of the principles by providers of TCA services to ensure progress in its use and development which everyone acknowledges can improve trading outcomes.”

The next steps in the OpenTCA initiative include branching out from the initial group of broker sponsors to include buy-side and additional sell-side representation in order to establish a process for adoption of best practices.

The full TCA consultation results are outlined in a report and video from TradingScreen.

About OpenTCA

Transaction Cost Analysis (TCA) has been used by investment management companies, their clients, and consultants for more than twenty-five years. Growing regulatory and business sensitivity to TCA has brought into sharper focus the lack of transparency and objectivity in the analytical tools used. Limited consensus exists on what should be measured or how it should be measured. There are few established and agreed-upon standards for transaction or market data that underpin any analysis. OpenTCA intends to highlight the issues that the industry needs to address if TCA is to be a valuable basis for assessment. It offers, for comment, what the authors believe to be appropriate and objective suggestions of ways to move forward in a number of key areas. It seeks to prompt a wide discussion, thereby helping create a framework within which valuable TCA services are delivered by competing providers.

About TradingScreen

TradingScreen is the leading independent provider of electronic trading solutions to the Buy Side, named best buy-side trading system in the Financial News Awards for Excellence in Trading and Technology Europe in 2011. The company offers a suite of execution management and connectivity solutions encompassing all asset classes across global markets. TradingScreen’s goal is to simplify the complexity caused by market fragmentation and the proliferation of asset class and broker specific trading tools, by consolidating execution management of both exchange traded and OTC instruments on a single platform. TradingScreen brings the major global sell side participants and leading regional brokers to a common environment. The benefit to clients is an exceptional reach across counterparties, products, geography and services ranging from execution to algorithmic trading services, prime brokerage and clearing. This functionality is delivered through a proven and reliable ASP install-and-support model. TradingScreen provides global coverage from offices in New York, Chicago, London, Paris, Geneva, São Paulo, Hong Kong, Singapore, Sydney and Tokyo.

Interested press and analysts may contact:

TradingScreen
David Zweifler
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Direct: +1 212 359 4018

Cognito
Catlin Mitchell
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Direct: +1 212 395 6300