Transaction Cost Analysis (TCA) has risen to the top of the foreign exchange (FX) agenda for an increasing number of global investment managers, as it should. Measuring the quality of FX execution, once an afterthought, is quickly becoming a requirement as underlying investors and compliance officers demand more transparency and stricter guidelines around FX trading activities.
This paper provides insight and detail around the TCA process, including:
- The importance of accurate data: While much of the data needed to perform TCA is provided by custodians or other FX providers, the definition, presentation and process to capture that data varies and can skew analytical results
- An analysis of the benefits and limitations of two common TCA methods: Daily Midpoint Analysis and Point in Time Analysis
- Eight important considerations for interpreting TCA results
- The expected evolution of TCA reporting
- Guidance for creating a comprehensive TCA program (The few paragraphs at the end provide high level guidelines, but the entire paper is about guidance on how to create a TCA program)
To read the full paper, click here.