Surveillance analytics drive heralds new era of TCA

Using the vast quantity of data collected for market surveillance could become a major source of information for informing trading decisions in the future.

Using the vast quantity of data collected for market surveillance could become a major source of information for informing trading decisions in the future.

Nasdaq OMX-owned SMARTS, a Sydney-headquartered market surveillance specialist, is currently looking at how to extend its analysis capabilities and its large depository of trading information to help inform traders’ decision-making processes.

“Within Nasdaq OMX, SMARTS sits alongside the market technology business and so we’ve been looking at how to leverage our market analytics alongside SMARTS streaming data and surveillance records,” explained Rob Lang, head of SMARTS at Nasdaq OMX.

“One that are we’re targeting is using the information we have to look at performance and help investors to figure out how changes in the way they trade can affect their performance.”

The proposal is not very different from transaction cost analysis (TCA) traditionally provided by brokers or done in-house by the buy-side. However, Lang believes the sheer breadth of data, alongside its real-time streaming analytics required as part of the market surveillance offering, could provide in-depth insights into market activity and inform decisions in ways not possible with existing TCA offerings.

The development of analytics as a complement to existing compliance services has become a major focus among market surveillance specialists in recent years as they look at ways of fully utilising the kind of big data that they inevitably collect.

Matthew Coupe, director of regulation and market structure at surveillance operator NICE Actimize, is enthusiastic about the development of this part of the surveillance business.

"There are some really exciting developments going on in compliance and surveillance right now as we begin to explore the kind of analytics that can be provided using the big data that we collect as part of our surveillance services," he said.

It’s not only the sheer volume of data that is being collected, but also the time spans that it covers, as surveillance operators are one of the few that have consistently collected such a large volume of data over many years, according to Lang.

However, Coupe is less sure about the ability of surveillance data to compete with TCA offering as the data sets and the way they are collected can be very different.

"There are some big differences between the behavioural analytics that surveillance and compliance services specialise in and the sort of thing needed for TCA and to inform trading decisions."

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