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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.

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