In the ‘new world’ under MIFID II data will be King. Voluminous, quality data. For trading desks, the winners will be those who use technology to process the data by delivering actionable and informative insight throughout the entire trade cycle to validate their best execution processes. At OTAS, our edge is providing differentiated analysis of market data sets allowing traders to execute more effectively across high touch and low touch flows and also have the tools to track their individual performance both in-trade and retrospectively on a post-trade basis.
For the latter, the post-trade audit trail provided by OTAS delivers a complete narrative of market conditions and exception analysis over the life of a client order. Agnostic to trade direction or strategy implementation, traders can use this feature to annotate TCA reports to evidence and substantiate trading actions or deviation from strategy due to market opportunities that arose in-trade.
This recent example illustrates how a range of market exception alerts created trading opportunities, prompting the market to react and were subsequently recorded in the audit trail:
Ladbrokes PLC – Monday 25th September
- Ladbroke’s share price return reached the day lows at 8.32am. All other market conditions remained normal until late morning.
- The shares then began to rally strongly. OTAS alerted this price behaviour being highly irregular compared to normal expectations.
- Traders react to this information countering the move, volume increases significantly creating an intra-day liquidity event. Price reversion observed.
- This behaviour is noted again shortly after as traders take advantage of similar market conditions.
- Following a period of price stability lit volume temporarily deteriorates.
- Post U.S market open, a number of exceptional high return alerts trigger creating further trading opportunities.
In this example, the narrative concisely details the market catalysts to support course correction or a change in strategy implementation.
Conversely, the audit trail highlights where there has been no significant market activity to benefit the trader. If a trade execution is being challenged for missing benchmark, the focus should lie with the algorithm performance and provider.
G4S – Monday 25th September – No Notable behaviour
The post-trade audit trail has a historic look-back feature which records and analyses daily market activity for the last 2 years, providing a best execution analysis tool used to help traders and compliance understand and attribute performance outcomes.
