Agency broker and trading technology provider ITG will now base its European transaction cost analysis (TCA) service on consolidated data from both primary exchanges and multilateral trading facilities (MTFs).
The move follows repeated complaints from the buy-side that TCA providers were focusing solely on primary exchange data and had yet to include the MTFs that have emerged since MiFID came into force in November 2007.
ITG will initially add in data from Chi-X Europe, Turquoise, BATS Europe and Nasdaq OMX Europe and its own POSIT non-displayed MTF. “We have included the venues with the most trading activity, the two most significant currently being Chi-X and Turquoise,” Michael Sparkes, managing consultant at ITG’s analytical business in Europe, told theTRADEnews.com. “We will continue to add smaller venues as volumes and available liquidity grow on them.”
According to the Fidessa Fragmentation Index, a weekly analysis of European trading, Chi-X, Turquoise, BATS Europe and Nasdaq OMX Europe collectively accounted for almost 22% of the trading in Europe in the week ending 3 July.
With the exception of POSIT, however, ITG will not initially include over-the-counter (OTC) trading data in the TCA product. This would include trades done on non-displayed MTFs such as NYFIX Euro Millennium and Liquidnet and brokers’ proprietary internal crossing engines.
“There is an ongoing debate in the market about the merits of including it,” said Sparkes. “We very much want to include OTC data, but we need to be sure that it is consistent, transparent and is showing available liquidity. We are in ongoing discussions with clients and once we and them are comfortable with the data we will include it in our systems.”
There are continuing concerns about the quality of OTC data, in particular around double reporting of trades. Also, because some OTC venues allow users to set minimum order sizes, not all the liquidity in these venues is available to all participants.
ITG claims it is the first specialist TCA provider to base its analysis on unified data from primary exchanges and MTFs. However, data vendor Thomson Reuters’ Global TCA product allows users to measure their performance against primary exchanges or a customised cross-market best bid and offer.