We have touched on the value of Transaction Cost Analysis (TCA) for certain client segments in a number of posts, notably Scott Mcleod’s excellent post here.
Multi-Dealer Platforms provide TCA tools, yet most banks still appear to be ‘uncomfortable’ in providing clients with the tools and reports that would enable them to ‘demonstrate’ the quality of execution they achieve by trading on the bank’s SDP, and thus obviate the need for clients to ‘validate’ pricing quality via the MDPs.
In the FX Algo space, banks provide TCA execution reports that demonstrate the quality of execution clients achieved.
Perhaps banks should start to view TCA tools in a similar way for non-algo clients.
TCA is NOT just about “Did I get the ‘best price’?” for each trade. Providing clients with execution reports that help them to understand their own execution behaviour and ratios (execution rate against quotes requested/currency pair) is very valuable for clients.
Actually, such detailed client hit rate ratios are just as valuable for banks (both for sales traders, and for pricing engines), and helps them to learn and understand their clients trading behaviour, and pricing sensitivity.
FX Week has an interesting piece on TCA here