Some underlying principles of transaction cost analysis need to be agreed if it is to become an effective tool for improving execution performance, says Robert Kay, head of analytics at TradingScreen.

The advent of electronic trading and extensive use of algorithms has given momentum to new ways of looking at transaction cost analysis (TCA). Individual sell-side firms want to demonstrate the efficiency of their algorithms and consult with buy-side clients on how to optimise their execution results. Buy-side traders, who want consistency in methodology and reporting across multiple brokers, are often using out-of-date techniques and technology, created for a different purpose operating in a different environment at a different time. Frustration on both sides is only one of the unfavourable outcomes. (SEE FULL ARTICLE HERE.)

The Trade, Issue 27 (Jan - Mar 2011)