Investment Technology Group (ITG) is rolling out a new Web-based Transaction Cost Analysis (TCA) tool. Aimed at ITGs buy-side clientele, the TCA tool will offer real-time transaction cost calculation and trading performance evaluation. The product is expected to be launched mid-fourth quarter and is currently being tested at 10 beta sites.
ITGs senior vice president of product management, Marie Konstance, declines to specify which firms are testing the TCA tool, but says the value-added service should be available soon to all clients, including users of ITGs flagship equity crossing network, Posit.
Prior to accessing the service through ITGs Web site, users must call the company and have access to the Web element enabled on their desktops, says Konstance. Performance can then be measured against a variety of benchmarks including pre-trade, intraday and closing prices along with the Value Weighted Average Price (VWAP) to find average execution costs.
The TCA tool is customizable based on the clients grouping needs and individual criteria. "Its very flexible in that it has different grouping mechanisms," says Konstance. "You can look at results by trader, commission, different days of the week. It can give you immediate feedback on your trading results."
Another ITG tool used in the process, the Agency Cost Estimator (ACE), offers users a look at the normal cost of trade and the adjusted cost of trading to show a projected costor what the cost should have beenand how well the transaction actually performed for the type of listing and the magnitude and liquidity of the trade. "First, it (TCA) looks at a benchmark and then it uses the ACE transaction cost modeling system to estimate what should have been the cost for a particular trade," says Konstance.
One important feature for money managers evaluating and improving transaction performance is the immediacy of the results using the TCA tool, says Konstance. "You can really refine your strategy when youre getting real-time feedback on it," she notes.
The TCA can be accessed via any Web browser once the client receives authorization through ITG. Acting as a broker/dealer, ITG provides technology to help clients access liquidity and execute trades. The TCA system can evaluate Posit trades as well as trades through any other ITG system. TCA will first be offered in the U.S., although Konstance says ITG is evaluating the prospect of extending operation to the European market. Konstance would not comment on the exact pricing plan for use of the TCA tool, but said it would depend on the clients relationship with ITG, whether it were in the form of a soft dollar arrangement or other arrangement.