Agency broker ITG has released a transaction cost analysis product for the institutional FX market that aims to improve transparency for buy-side firms.
ITG TCA for FX uses ten providers of FX data, including market makers, electronic communications networks and banks. The offering measures transactions against tick-level traded rates, indicative rates and the forward rate curve.
Traditionally, FX has been a secondary concern for many asset managers, but a series of high-profile lawsuits in which asset owners and money managers have sued custodian banks for alleged overcharging has increased the spotlight on FX execution quality.
ITG TCA for FX is designed to help buy-side traders to better understand the liquidity landscape and manage volatility, so that they can reduce trading costs and improve their FX strategy. ITG already offers a similar product for equities.
“Foreign exchange is the largest and most liquid securities trading market, but it is also among the least transparent and most challenging to trade in,” said Ian Domowitz, head of ITG Analytics. “ITG TCA for FX combines the power of ITG’s equities TCA platform with a set of FX transaction data to measure performance, improve execution processes and quality and fulfil compliance requirements.”
Bid-ask spreads in FX may provide a challenge to asset managers more accustomed to equities. In FX, small transactions tend towards wider bid-ask spreads, medium size transactions typically have narrower spreads, but for large transactions the spreads are wider, due in part to the risk-transference role of FX trading.
The ITG FX TCA offering joins a similar service launched by New York-based agency broker and technology provider Abel Noser earlier this month.