Does TCA Really Need to be Independent?

Speaking at the Forex Network Chicago conference, Mike Harris, president of Campbell & Company, discussed the pros and cons of independently provided transaction cost analysis (TCA).

Pressed on whether a fintech firm being acquired by a larger company is necessarily a bad thing for their clients, Harris pointed to the example of BestX, the TCA provider that was acquired by State Street in August.

Harris explained that Campbell & Company partnered with BestX because their TCA product was focused specifically on FX rather than being adapted from equities, and that they were the first to offer peer-to-peer functionality so that firms could opt-in to compare their trades to other people’s, as well generally being at the forefront of the TCA space. However, he then added: “But at the end of the day, the best part about that platform was that it was broker neutral.

By contrast, Harris said that when banks would send his firm TCA reports, “we would put it right in the trash can, because it’s a little like my kids writing their own report cards”.

So, unsurprisingly, he was not thrilled when he initially found out that BestX was being acquired by a bank.

“I’ll never forget the day I picked up the phone and Pete [Eggleston] called me and it was obvious that he was telling me that they were in play and I just said, ‘Please tell me it’s not a bank’ and he said ‘It’s a bank’,” recalled Harris.

However, he added that it would have been a more problematic issue if the bank in question was one that Campbell & Company had active counterparty trading with, rather than State Street, which has traditionally had a more custody and agency focus.

In addition, Harris conceded that there is potential upside for his firm from this acquisition as it could enable the BestX team to fulfil some of the requests that he had been making of them.

“We were pushing Pete and the guys at BestX, we were constantly telling them that the buy side doesn’t just trade FX, for the most part, we trade equities and fixed income and futures and commodities; you’ve got to start getting those asset classes into the platform. And they didn’t have the bandwidth to do that,” he said.

Harris continued: “The other bigger problem as they started to look into things like fixed income is that they didn’t have access to the data. Market data has become very expensive and very hard to get your hands on. So I think they reached that tipping point where they realised that in order to get to the next step and deliver what clients were expecting – in the face of the ITGs and Bloombergs of the world that were quickly playing catch up coming from the other side, the traditional side – they had to make that leap.”

Ultimately, he concluded: “Is it perfect? No, but I think it’s the best that they could do.”

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Galen Stops

Galen Stops