By Flora McFarlane.
Hermes Investment Management has chosen IHS Markit’s TCA platform ahead of incoming best execution obligations under MiFID II.
The technology provider’s TCA platform helps firms to evaluate the quality of trade execution, combining execution, algorithmic, venue and smart order router analytics. In other asset classes, TCA has proven to provide valuable data on efficiency in finding liquidity, venues for fill probability, and pricing.
With changes aimed at improving transparency coming in on January 3, 2018, Michael Richter, IHS Markit’s director of trade analytics, highlighted the need for tools to quantify best execution.
“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.”
The fixed income marketplace proves slightly more complex to provide that sort of feedback, meaning that at the moment the TCA offering in fixed income is more compliance oriented, according to Heather Hallack, product management director for TCA at IHS Markit.
Hallack says, “Because of the dimensionality of decision making in factors such as which bonds to trade, liquidity opportunities, and pure slippage, there is so much more that we have to consider in the fixed income world.”
Following initial reluctance from traders, Hallack says that IHS Markit went on to work with traders who saw the potential of fixed income TCA, with the greater uptake from firms helping to accelerate the development of the platform.
She says there is more product development in the pipeline as a greater influx of data comes out of the fixed income space. A key issue in entering the fixed income space is the access to data, and thanks to the data services available across IHS Markit’s offerings, the company will be offering TCA for loans within the next few weeks, before moving into CVS in Q1.
“There is for certain a dearth of information, but we are in a very fortunate position which can only be improved upon as we grow our business.”