Introducing benchmarks into the FX trade execution process

The growing FX transaction cost analysis (TCA) market is bringing more tools to measure the performance of liquidity providers, execution quality and even latency. Frances Faulds looks at what is in store.

First Published: e-Forex Magazine 54 / Special Report / October, 2013

FX Transaction Cost Analysis (TCA) is developing at such a rate that it is spurring demand for more specialist TCA providers as it grows in sophistication. Today, there is a wide range of pre and post-trade analysis benchmarking tools due to the increased demand for lower latency and evidence of best execution following the legal challenges to custody banks over the quality of their FX execution over the past few years.  TCA grew up out of equities, where there is a wealth of trade data coming out of the exchanges. It is much more challenging to carry out TCA in the over-the-counter market where there is much less published information on volumes and prices and getting a sense of this information can be very challenging for a TCA provider in FX. Russell Investments has been using transactional cost analysis in FX since 2004. The company developed its own benchmarks because there were so few benchmarks available in FX.  Michael DuCharme, a senior member of Russell Investments’ currency team,...continued

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