Transaction cost analysis (TCA) has risen steadily up the equity trading agenda over the past decade and is set to become even more important in 2019. Over eighty percent of equity trading desks already use TCA, according to Greenwich Associates, which confirms that one of the top nine major market trends this year is the further embedding of trading analytics into the equity trading workflow.
Regulation continues to be the driving force. New order handling disclosure rules from the Securities Exchange Commission are about to do for transaction transparency in the US what MiFID has already done in Europe. Like MiFID, the SEC rules require broker-dealers to report on how they route and handle orders while also giving investors the information they need to assess the impact of routing decisions on order execution quality.
With trading analytics becoming ubiquitous across buy and sell side trading desks, and as broker-dealers converge their high and low touch businesses, it is increasingly important that institutions have right tools to find and access liquidity and optimize routing. Regulations are leading to more complex market structure and prompting new ways of trading. In this environment, it is essential to have market gateways linking all relevant trading venues, as well as a smart order router (SOR) in order to find the best execution.