Plato Partnership has teamed up with Strategic Insight’s LiquidMetrix to research, design and implement new methodologies for assessing block trade performance.
The partnership will see Plato work with the research team at LiquidMetrix’s research and development team to design a framework for firms to assess the quality of execution of block trades on different block venues.
Mike Bellaro, co-chair at Plato Partnership, explained traditional transaction cost analysis (TCA) has failed to allow for such comparisons.
“Block trading analysis requires careful risk adjusted measurement of performance to allow fair comparisons with algo trading. TCA often focuses mainly on what is completed, ignoring or side stepping opportunity costs,” he said.
MiFID II – due to be implemented by 3 January 2018 – will see large-in-scale trading benefit from waivers enabling participants to negotiate without pre-trade transparency.
Limits on dark pool trading and the removal of broker-crossing network models could cause a surge in block trading activity.
Sabine Toulson, LiquidMetrix co-founder at Strategic Insight, added MiFID II requires firms to justify different execution strategies.
“There is a clear need for a new generation of meaningful block trading metrics that demonstrate execution quality for the industry,” she said.