S3 helps buy side analyse counterparty performance

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By Flora McFarlane.

S3 has added contra reporting functionality to its Fixed Income Execution Quality Suite in order to provide greater insight for clients into the trading activities of their counterparties.

The suite is a platform developed by the Austin-based financial software services company to provide evidence for best execution, for both internal and external reporting and analysis.

The addition of contra reporting functionality broadens the analytics available to clients, identifying how their trading operations are impacted by the activity of specific counterparties.

Data is provided by the clients through a nightly feed of trade activity from their internal trading systems, and it is up to them on how best to use the data. After receiving the data, S3 runs analytics and provides information on the four data points of the trade for the client to access the following day.

This enables clients to access analysis about their counterpart’s trading history, providing four data points for each trade; the price two days prior, the day before, the day of and the following day’s amount, allowing them to assess whether the trade was at a reasonable price.

Greater analysis of counterparty activities also allows firms to identify trends with specific trading partners, determining which counterparties positively impact their fixed income trades.

Josh Barry, product manager for fixed income, at S3 says, “They want to see if there is any sudden change of value when buying or selling from a counterparty. They don’t want to be transacting with a predatory or toxic counterparty.”

Using the system they are able to watch the value of the position over time and determine the efficacy of their trading strategies. S3’s clients can also use the data to ensure they are providing due-diligence for their customers and adapt their bond trading operations to best suit the needs of their client.

One client in particular drove a lot of the features to provide more sophisticated analysis, however S3 has been working with several clients who use the function to watch the position value over time.

Barry says that so far there has not been any evidence of predatory counterparties, but “clients like the fact that they’re watching.”

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