Transaction Cost Analysis

Meet MiFID II’s financial compliance standards and make sure your firm is taking “all sufficient steps” to give clients the best service – and transaction price – you can.

Introducing MiFID II Transaction Reporting

With the latest Markets in Financial Instruments Directive (MiFID II), investment managers, regulatory compliance professionals and traders are all now legally obliged to take “all sufficient steps” to facilitate the execution of clients’ transactions at the best possible price. This demonstrates a clear increase in severity from the original MiFID’s requirement that “all reasonable steps” be taken to this end. This makes MiFID II transaction reporting and transaction cost analysis (TCA) essential in determining whether a transaction was completed at the best price for the customer.

Though the method of reporting or chain of command might alter in different financial institutions, TZ is here to provide transparency in MiFID II transaction reporting for a whole variety of firms. With TZ, errors in execution can be addressed and resolved quickly, and not left to become a systemic risk.

MiFID II and Transaction Cost Analysis

As MiFID II highlights, cost will still be considered as one of the key factors in execution quality for retail clients. The best execution for retail client orders is defined in MiFID II as “the sum of the price and the costs incurred by clients” and represents “the price of the financial instrument and the costs relating to execution”. This includes “all expenses incurred by the client, which are directly relating to the execution of the order, including: execution venue, fees, clearing and settlement fees and any other fees paid to third parties involved in the execution of the order”.

TZ for Transaction Cost Analysis (TCA) is the perfect solution to meet the new requirements of MiFID II transaction reporting. It offers the following features:

  • Access to your own data, for immediate historical analysis and archiving
  • The ability to assess performances in best execution under different verticals, for example, brokers, teams, platforms and counterparties
  • Implementation shortfall and the transactional cost of executing, and a determination of whether swift order routing would have facilitated a better execution
  • Calculation of an arrival price versus the actual execution price to indicate the implementation shortfall cost
  • Calculation of end of day versus the arrival price to demonstrate the gain or loss to the portfolio manager, versus the implementation shortfall cost for analysis
  • Multi-venue tracking for execution prices and liquidity
  • Complete access to all data stored in TZ, meaning you can data mine at any stage and create reports and tests in seconds

Meeting MiFID II transaction reporting standards

TZ for Transaction Cost Analysis (TCA) moves with the customer and adapts to new regulatory requirements in real time, so you don’t need to worry about your compliance with new tests or reports.

TZ for Transaction Cost Analysis (TCA) also allows you to look back and see the ‘lay of the land’ the trader saw, and decipher whether the correct procedure was undertaken in line with MiFID II and the institution’s best execution policy. The market data aspect of TZ enables you to to have prescient information prior to the trade being executed in retrospect.

TZ for Transaction Cost Analysis (TCA) can be used to:

  • Run preset reports, set alerts or compile bespoke reports, and export them to Excel or PDF
  • Monitor trader performance and broker analysis, and even assess the possible implementation shortfall issues in an institution’s internal processes
  • Allocate and calculate explicit external costs versus internal costs. This helps firms to determine why a particular venue or broker was selected, and if the selection was in the client’s best interest
  • Use multi-venue analysis to benchmark venues as a comparison, and get more insight into the landscape in front of a trader before the execution. This could result in savings on exchange fees or hidden costs when deciphering if the correct venue was selected at the time of execution
  • Analyse arrival price versus execution price, and the relevant shortfall, incorporating portfolio manager daily performance in a particular asset versus execution desk
  • The ability to publish execution policy directly from TZ
  • Interactive exportable graphs for MI of the chosen tests or bespoke reports
“It’s the intuitive nature of TZ that makes working with this solution so simple. The system is designed to be used by compliance and ultimately to save my time which is precious. I achieve so much more because of it.”  

 Compliance Officer at Top 10 Alternative Asset Manager

‘Eflow’s maturity as a software provider has restored my faith in a handshake. A promise that what was offered in project inception was delivered’

Compliance Officer at Leading UK AIM broker

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