US electronic market maker, Virtu Financial Inc., has launched a transaction costs analysis (TCA) tool to help traders better monitor their transaction costs when trading foreign exchange and fixed income markets.
Using Virtu’s ACE Model, the tool assesses trading performance and calculates implicit costs under a variety of market conditions, providing traders with the ability to assess historical trading data with comparisons of liquidity providers and data visualization technology.
Amongst its many functions, the newly released FX and FI models track all changes in trade conditions or execution venues, while also applies custom measures to perform portfolio construction analysis. This includes an automated pre-trade execution strategy selection and performance benchmarking that could be integrated into clients’ internal applications for analysis, such as portfolio trading optimization and portfolio liquidity metrics.
As such, the service enables FX and fixed-income investors to understand the liquidity environment and manage volatility, which can help reduce trading costs and improve foreign exchange strategy.
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FX TCA complements equivalents for other assets
The new product could also be seen as a response to increasing transparency requirements which define the conduct of all market participants, including the need for buy-siders to prove best execution.
The addition of TCA functionality for FX also complements Virtu’s equivalent product for other asset classes such as equities, which is widely used among asset managers.
Virtu makes markets over 25,000 financial instruments, at over 235 venues, in 36 countries worldwide, continuously quoting buy and sell prices for others to trade against, profiting off the bid-offer spread, using high-frequency trading (HFT) strategies.
In 2017, Virtu Financial acquired rival KCG Holdings Inc. for $1.4 billion in cash, as tough market conditions forced high-frequency traders to consolidate and rethink business strategies. The combined entity created a giant HFT firm responsible for around 20 percent of the volume in U.S. equities.
Kevin O’Connor, Virtu’s Head of Analytics and Workflow, commented, “Our ACE Analytics product has been the leading cost and market impact model in the equity markets for the last 10 years, extensively used by both buy and sell-side firms. Driven by strong client demand, extending the model to FX and FI reiterates our commitment to providing a full suite of broker neutral, multi-asset class analytics and trade execution solutions on our global platform.”