ITG, a US-based agency broker and financial technology company, has introduced a transaction cost analysis product for the institutional foreign exchange market as fund managers seek to manage their expenses.
ITG TCA for FX will use data from 10 providers including some of the largest FX market makers, ECNs and banks, according to a company statement, and measure transactions against tick-level traded rates, indicative rates, fixing rates and the forward rate curve.
Transaction cost analysis, already widely used in the equities market, is becoming increasingly sought-after in foreign exchange following a series of high-profile lawsuits in which US states have sued custodian banks for allegedly overcharging state pension funds for FX trades carried out on their behalf.
ITG’s TCA for FX will assess trading performance and implicit costs under a variety of market conditions, which will help buyside traders and portfolio managers to gauge whether they are getting best execution, as well as to better understand the liquidity landscape, manage volatility and adjust strategies. This will ultimately help them to reduce overall trading costs and boost performance, the company says.
“Foreign exchange is the largest and most liquid securities trading market, but it is also among the least transparent and most challenging to trade in,” says Ian Domowitz, head of ITG Analytics. “ITG TCA for FX combines the power of ITG’s industry-leading equities TCA platform with an unmatched set of FX transaction data in order to measure performance, improve execution processes and quality and fulfil compliance requirements.”
Presently, the service, which covers the spot, swaps and forwards markets, is in beta testing with a select group of clients with a general roll out scheduled for June.
The launch comes almost two years after ITG released an FX TCA product in partnership with FXall, which was designed to enable buyside institutions to validate the impact of their FX trading strategies against FXall benchmark data (Squawkbox, 10 May 2010).