State Street Corporation (NYSE: STT), a global custody bank and financial service provider for institutional investors, has acquired London-based FX analytics specialist BestX in a bid to enhance its services in the electronic foreign exchange markets. The financial terms of the deal were not disclosed.
BestX was founded by former Morgan Stanley executives in 2016 to offer post-trade transaction cost analysis for spot FX, forwards, NDFs and FX swaps. Later in 2017, the best execution firm has went live with pre-trade analysis functionality, as well as TCA for vanilla FX options.
BestX also enables participants to implement and codify their best execution policy in the software and ensure those parameters are met using data from a broad range of sources.
Legal Risk Factor Beneath Ripple’s Lawsuit from SECGo to article >>
For State Street, the purchase allows it to better compete with rivals who rely on their own technology to provide clients with similar services. If combined with the Boston-based firm’s offering, it would allow their customers to demonstrate the best execution through post-trade transaction cost analysis (TCA) when trading electronically with State Street.
However, investors will need some time to understand how the transaction fits into State Street’s long-term strategy as Thomson Reuters-backed BestX prides itself on operating as an independent company, “without the inherent conflict of interest or risk of abuse that arises from being affiliated to an execution venue.”
The future of BestX is also promising due to increasing transparency requirements which define the conduct of all market participants, including the need for buy-siders to prove the best execution. For instance, MiFID II requires participants to achieve the best possible result for clients, taking into account a range of execution factors.
BestX has already signed several Wall Street giants including Citadel Securities, JP Morgan, and HSBC, which are using the service for independent validation on execution quality for their own clients.