SunGard has launched an independent, real-time transaction cost analysis (TCA) solution for foreign exchange (FX) trading to help traders, corporate treasurers and portfolio managers understand the quality of their FX executions. SunGard’s FX TCA solution provides real-time FX pricing and transaction data on a customizable data analysis toolkit delivered via a secure software-as-a-service (SaaS) environment. FX TCA provides analysis and support in both a post-trade model and in real-time. 

As an independent provider of pricing data and analysis not tied to a particular execution venue or pricing source, SunGard is able to focus on helping organizations gain real-time performance of trading activities while providing clients with the flexibility to maintain their current broker relationships.

Real-time FX-prices

SunGard take tradeable data from five of the top ECNs (Electronic Communication Networks) and seven in total, and also from the tradeable price streams from 10 banks to calculate the price when the deal was struck. SunGard take the super-book bid & offer price and then use a weighted mid to take account of any imbalance between the size of the bid-offer amounts which SunGard believe indicates that market price needs to be adjusted from the theoretical mean. This is calculated 10 times/second, so users are able to see bid, offer and mid prices at any point in time, see screenshot:

Source & Copyright©2014 - SunGard 

FX TCA Covers 50+ currency pairs – G10, E10, emerging markets, NDFs and precious metals.

FX TCA analysis and metrics 

SunGard’s FX TCA solution offers in-depth analysis on FX spot transactions and shows treasurers and asset managers where their clients outperform or underperform, using standard industry benchmarks such as market timing, implementation shortfall and daily trading ranges. FX TCA calculates:

• Execution alpha is the difference between the weighted average execution price and the observed mid-market price at the time the order was placed in the market.  A negative value is a loss and a positive value is a gain.
• Implementation shortfall is the difference between the execution price and the observed mid-market price for the currency in question observed at the time of execution.  This value is represented as a total value of the trade and represented in two forms - as a total amount paid in your base currency or normalized to  $/million in your base currency.  A negative value means that you paid more than the mid-market and a positive value means that you paid less than the mid-market.
• Reversion is the difference between the execution price and the observed mid-market price for the currency in question at various time periods before and after the execution time of the trade.  For example, Reversion +5 minute is the gain/loss on the trade 5 minutes after execution.  All values are normalized to $/million in your base currency.

Using these calculations users can see exactly what is cost of executing the trade at that point in time, the alpha and the reversion cost for each deal. FX TCA provides reports on the performance of banks, dealers, dealing desks, performance for a particular trade, etc.

Implementation and Users

FX TCA implementation can be by:

• direct integration with SunGard platforms, including the SunGard Global Network (SGN), AvantGard Quantum and other SunGard trading systems which support both T+1 and real-time analysis
• file uploader which supports T+1 
• FIX integration which supports both T+1 and real-time analysis

FX TCA has just been launched. There is one large bank using the product, but at this stage there are no corporate user names to be announced, although there are SunGard users world-wide looking at it.

Charges

FX TCA has a tiered pricing structure. The actual price for a user depends on trade volumes and value, and the number of reports taken.

Benefits

SunGard claim that the main benefits are:

• much more transparency around what paying
• price matching on what expect
• verify prices against what expect. This is particularly important for those who only deal with a single bank
• compare and contrast multiple FX bank providers
• compare performance of internal units / methods of execution, e.g. performance of different dealing rooms
• an indication of what size of bid should be placed via algorithmic trading platforms, and be able to track performance of the algo.

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CTMfile take: Transaction Cost Analysis is becoming more effective as the analysts use more realistic estimates of the market price of each deal. SunGard FX TCA is a welcome addition for improving FX trading cost-efficiency and control.