Why SDPs should provide TCA tools for buy-side clients

The majority of single-dealer platforms (SDPs) – especially those of regional banks, provide mainly principal (rather than agency) based pricing to clients. That’s where the bank takes the other side of the trade (even if the bank covers the trades by back-to-back hedging with their liquidity providers), making their money on the spread, rather than helping the client achieve the best execution for the transaction, and charging a commission for the service.

Whilst corporate and non-financial clients will happily use SDPs, we are seeing Continue reading

UBS adding ‘regulatory focused’ FX Algo’s to SDP

Interesting to see UBS preparing to release a suite of ‘regulatory focused’ FX algo’s, as part of their Single-Dealer Platform suite of offerings that would route client trades to the ‘best trade execution venue from a regulatory perspective’.

This is very much in-line with Caplin’s position as presented in our recent white paper Continue reading

Single bank platforms huge winners according to Euromoney FXNews buyside survey

An earlier post this week looked at the initial findings from the EuroMoney FXNews inaugural FX buyside survey.

The survey finds that voice trading is likely to fall below 15% as more bank platforms come online, and more bespoke currencies move from voice to online trading.

The survey then reveals that:

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Single-dealer platforms and TCA

While the notion of Transaction Cost Analysis has been broadly adopted by the equity markets, it doesn’t have similar adoption in the OTC world. Why is this so? I will attempt to explain the various factors that are driving this extremely important topic.

TCA adoption in the equities world

As the equity markets became more fragmented (chiefly as a desire from the politicians/regulators to encourage more competition amongst exchanges), investment managers (IM) demanded more information from the execution brokers as to how & where the brokers chose to execute trades done on behalf of the IM.

Provision of a metric or series of metrics allowed the IMs to calculate their broker’s execution performance. Originally this was via factors such as VWAP or implementation shortfall.

As execution algorithms became widely adopted, other factors were added to measure the algo performance across lit, dark & internal execution venues. In addition, the regulatory focus on best execution meant that TCA could provide an important measure of best ex. You cannot control a cost unless you can measure it.


In the meantime, the FI & FX markets were developing their own transaction models such as ESP, RFS & RFQ.

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