Tuesday, February 27, 2018 Stamford, CT USA — Increased focus on trading analytics, best execution and compliance has turned Transaction Cost Analysis (TCA) from an optional feature to an essential component of buy-side equity trading desks.
A new report, TCA Usage on Equity Desks, from Greenwich Associates notes that the implementation of MiFID II and proposed SEC-enhanced order transparency rules will fuel new demand for top-notch TCA capabilities in the months ahead.
Eighty six percent of the 102 buy-side trading desks participating in a recent global Greenwich Associates study have adopted TCA, which they use to document best execution, understand trading performance, optimize routing, and compare against their peers. That share reflects four years of steady growth, which appears set to continue and even accelerate in the rest of 2018 and beyond. That’s good news for TCA vendors like ITG, , Bloomberg and Able Noser Solutions – the leading TCA vendor
Nine out of 10 buy-side trading desks now use a third-party TCA tool, compared to less than three-quarters in 2014. The uptick in the use of third-party systems reflects both the growing importance of TCA to institutional investors and the growing complexity of TCA processes which are tailored to a specific desk’s workflow..
Due in large part to that complexity, vendors who capture the business of new TCA users are well positioned to maintain that business for the long term. “With TCA systems deeply embedded into the workflow of trading desks, and investments in customization and training already made, it creates a high degree of friction for trading desks to switch to a new system,” says Richard Johnson, Vice President of Market Structure and Technology at Greenwich Associates and author of the report.