FAQs | Adda Analytics

Transaction Cost Analysis

Q. Where does the benchmark data come from?

The interbank reference rate data is sourced from contributions from 600 third-parties through ICE Data Services. No data is taken from any underlying price maker directly to ensure that the rate cannot be manipulated whilst being representative of the market midrate at any given time.

Q. How often is a mid-reference rate produced?

A rate is produced every 15 milliseconds in 70 commonly traded pairs that have sufficient ECN coverage to create a reliable midrate that cannot be manipulated. In less liquid pairs, ICE Data Services produce rates periodically, usually once a minute or so, and the picture with forwards is much the same.

Q. What product coverage does the TCA tool have?

Midrates provided in Spot, Forward, NDF and Restricted Currencies. We have no coverage in Options at this stage. We can analyse midrates in 300 spot pairs, and we now have approximately 500 different forward tenors.

Q. Why is there a focus on data?

We believe that independent data is key to accurate measurement. If a bank knows where a client is getting their TCA measurement data from, they will be tempted to execute that client’s business in that venue in order to minimise costs and look like they are doing a better job than they are. If the data comes from inside the cost-chain, it can’t be relied upon. Our data stands outside the cost chain and is therefore reliable and can be used for accurate measurement.

Q. But surely FX is the world’s most liquid market and it just doesn’t matter…

The liquidity of the FX markets is systematically overstated. It is high, but not that high. The BIS data from 2016 indicates that at the very busiest time of day in the busiest currency pair (EURUSD), an average maximum flow rate of USD 14.4 million per second is achieved. This is for the whole market. As clients seek to execute large trades in a market that operates in milliseconds, it becomes clear that information transfer in this illiquid environment is of significant importance.

Q. How to view TCA results?

We offer a choice of multi-layered dashboard access or PDF reports. We operate traffic light systems if required, and can structure the visualisation to suit the business. For example, if different departments need different reports, then that is simple.

Portal Security Information

Audere Web-Portal Security Information Report Download

Overview
Audere uses Azure Active Directory for user management and authentication, both for access to internal resources, and for governing access to Audere’s analytics software for clients.

Security is integrated into every aspect of Azure. Azure offers our clients unique security advantages derived from global security intelligence, sophisticated customer-facing controls, and a secure hardened infrastructure. This powerful combination helps protect our applications and client user information and data.

For more information on Azure security features, please see: Azure security documentation | Microsoft Docs

Web portal users
Audere creates an external user in their own Active Directory, using a client email they use to log in to their Microsoft tenant. Row-level security feature in Power BI ensures that client sees only their own cash flow model, and no-one else's. Iris clients do not have access to any internal component of Iris reporting solution.

Excel files with client data
Iris clients supply their projected cash flows and trade data in a specially-formatted Excel file. Audere stores this file securely, loads this file to SQL database every time this file is changed. Iris risk model calculates risk exposures, hedging strategy effects, other metrics modelling risk exposure using data in these file. Security and privacy approach is elaborated further in this document.

Persistent FX data store in Azure SQL
Azure SQL database, which serves as data warehouse behind all of the reports in Power BI, except real-time dashboard. Spot and forward rate data are loaded from Newchange FX API with a scheduled job using Azure Functions service. Cash-flow data provided by clients, as well as simulated daily changes are loaded to database ad-hoc every time these are updated.

Tabular model
Stand-alone representation of semantic model behind Power BI reports. Entire risk model is represented in this tabular model. Tabular model can be viewed as a collection of metadata, KPIs, calculation groups, hierarchies, translations, security roles, and many other elements. This tabular model can be exposed to third party using other client tools.

Power BI reports
Collection of visuals, widgets. All definitions of calculations, KPIs are defined outside these reports in tabular model. Power BI reports and tabular model are hosted in the same Power BI workspace, connected to Power BI Embedded capacity.
For more information on Power BI security, please see link.

Reporting Hub
Reporting hub is an hosted web application, developed by a third party, a white-label layer on top of Power BI reports. This application embeds Power BI reports, serving as a client-facing portal with all visual Power BI content. Customers of Iris risk management solution consume charts, visuals through Reporting Hub.

Inter Continental Exchange
Inter Continental Exchange FX rates is a third-party API, providing real-time and historical data of spot and forward rates for multiple currency pairs. API provides data in JSON format.

Simulated daily change of spot rates
Audere simulates daily changes of spot rates for multiple currency pairs. This is done by estimating distribution of historical daily changes, and using Monte-Carlo method to generate 500+ trials of daily spot rate change for a year. Estimating historical distribution and generating data is done using R statistical programming language. Data is loaded to SQL database ad-hoc every time there is a new simulation table.

Disclaimer [Transaction Cost Analysis]

Foreign exchange transaction markets are mainly executed Over the Counter (OTC); there is therefore no publicly quoted exchange rate. Major currencies (USD, EUR, GBP, etc.) have deep and liquid markets and with an average of $6.5 trillion transacted each day, it is uncomplicated to determine the mid-market rate down to the millisecond.

Exotic, restricted, or emerging market (EM) currencies are traded much more rarely. It is entirely possible that for any minute, hour or even a day, no registered trades occurred (or were reported), and therefore, no mid-market rate can be easily was established.

Effective transaction cost analysis (TCA) reporting should be based on the notion that the true mid-market rate corresponds to each particular transaction time stamp. For exotic currencies, our analysts may have to use a rate which time stamp is not identical to that of the transaction.

Where possible, our analysts make efforts to determine the most relevant rate available to provide accurate analysis but cannot always guarantee it corresponds precisely. It is encouraged to review a large sample of historic trades to provide a sensible indication toward cost to the client. For more information on the topic, go to the Transaction Cost Analysis FAQs section.