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In a speech delivered on September 7, SEC Chairman Mary Schapiro pronounces the events of May 6 to be “clearly a market failure,” and promises a new report on the Flash Crash. The whisper is that the report identifies nothing new, that no clear causes have been uncovered, and that the SEC is still looking for the “smoking gun,” as reported by Reuters two days after the event.
Unless a TCA system has plentiful data and flexible benchmarks, it will only answer the most basic questions and fail to provide valuable insights that will lead to lower transaction costs and improved fund performance. As in the equity market, the foreign exchange market demands pre-trade analytical tools and peer group analysis that will measure slippage in traditional trading styles as well as quantitative trading and algorithmic trading.
I recently received my copy of the Winter 2014 Journal of Trading. Quickly scanning the journal’s cover, I began flipping through to an article on real-time TCA visualization. I stopped, when I came across the title which I reuse for this comment.
FX markets lack the transparency of equity markets, and as a result, attention is turning to transaction cost analysis to achieve best execution. In this interview from the Winter 2012/13 issue of Best Execution magazine, Jim Cochrane talks about the challenges of achieving best execution in the FX market.