Hermes Investment Management has chosen IHS Markit to provide transaction cost analysis (TCA) in a bid to meet best execution requirements.
Director of trade analytics, Michael Richter, explained best execution as a fiduciary obligation remains a major challenge for asset managers.
“Firms will need to think about best execution analysis and TCA as essential parts of their risk management process, particularly as execution analytics expand in fixed-income and move from post trade to the entire trade lifecycle,” he added.
The use of TCA for best execution in fixed income has been subject of debate due to the lack of data and reference points available as the instrument is often traded OTC.
A panel at an event hosted by The TRADE in June this year told delegates these hurdles will likely shift as the use of TCA adds to the data and reference points, providing participants with more proof of best execution.
Because of this, service providers like IHS Markit are seeing increased demand for a wider range of data analysis and data capture tools from buy-side clients.
IHS Markit’s TCA service provides multi-asset data and combines execution, algorithmic, venue and smart order router analysis.
Users are able to evaluate the quality of trade execution by analysing order routers for efficiency in finding liquidity, venues for fill probability, opportunity costs and order types for information leakage and market impact.