September 01, 2016

  • Onur Albayrak

  • Milan Borkovec


ITG FX TCA Size-Adjusted Spread Estimates Offer Insight Into Expected Spot FX Costs

ITG’s size-adjusted spread (SaS) cost estimates provide guidance on the anticipated costs associated with instantaneous spot trade executions, measured relative to the prevailing mid-quote rate at the trade time. The underlying data for our model contains dealer quotes from 6 global banks and 5 major ECNs. By varying the manner in which we consolidate the limit order book across trading venues / liquidity providers, we are able to reflect different trading styles and credit tiers as well as varying degrees of sophistication of market participants. The use of the empirical limit order book enables us to construct cost estimates for instantaneous trading at various consolidation levels, deal sizes, as well as at various times of the day.

In this study, we provide answers to the following important questions:

  • Are ITG’s SaS cost estimates reflective of observed costs of spot trades for large institutional investors?
  • Which of the supported consolidation levels best represents the realized costs of ITG’s FX Peer clients?
  • Is the execution performance of ITG’s TCA service clients uniform and consistent across various trade scenarios?

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