Brokers in the Asia Pacific are increasingly looking beyond post-trade transaction cost analysis (TCA) and looking to get intra-day information on their performance, according to Serdar Armutcu, head of Asia Pacific at OneMarketData.
He considers that there is still significant informational asymmetry between the buy-side and brokers on an intraday basis and democratising the access to intraday execution information is an area that brokers should focus on in order to differentiate themselves from the competition.
Armutcu previously worked at Mizuho Securities in Japan, where he led the build out of the algorithm and trading analytics models. Before that he was responsible for the LMX algo product at Lehman Brothers, Tokyo.
With real time TCA, he explained that the difference is that data; market trading data, orders, executions, news data as well as any other types of proprietary data is coming in a continuous stream, which makes the data set much more complex in structure and far richer in color and diagnostics for the trader.
“The traditional types of metrics which have been used thus far provide a way to pierce the data to get at the long term trends in execution costs,” he said. They only provide a rear-view mirror picture and therefore they lack the ability to guide the buy side trader on how to adjust their actions on the next order or how to set algo parameter values during trading, when market conditions can change very quickly.”
Using a real-time setting in addition to these standard metrics, a trader can analyse tick-by-tick data to continuously provide market colour, using tools that incorporate metrics and diagnostic tools which cover areas which did not appear relevant a few years ago but which have a direct impact on execution quality now.
Some examples of these are volume participation, volatility, and real time momentum, liquidity analysis by venue and dark pools through heat maps, information on where to find liquidity, toxicity levels, latency statistics of different exchanges and venues, broker peer comparisons and prediction of order completion probabilities.
“This also means it makes it so much more challenging to design interfaces and visualisations that don’t overwhelm the end users,” said Armutcu. “Building useful visualisations is just as much an art as it is science, and requires special sensitivity to things like colour, shape and form that can’t be expected to come with the packaged software system. With these tools it is a bit like giving the brushes and paint to somebody and asking them to paint a picture. What you might get is not guaranteed to be a Mona Lisa.”