Forefront Communications

Pensions & Investments: Another MiFID II Impact — Best Execution of Derivatives

Mackey

Forefront Communications

Forefront Communications

Add derivatives transaction cost analysis — measurement of best execution — to the list of services that could grow with the advent of MiFID II in January.

Required disclosure of trade execution data under the European Union’s Markets in Financial Instruments Directive II, effective Jan. 3, has transaction cost analysis providers saying they expect more institutional investors — pension funds, endowments and foundations, and their money managers — to seek third-party help in reporting best-execution data.

Some TCA firms are adding to their existing equity and fixed-income analysis services by developing capabilities in listed options, asset-backed securities, interest-rate swaps and other asset classes traded over the counter.

Dash Financial Technologies, a New York-based trading technology provider, has seen an uptick in interest in the firm’s listed options analysis over the past year. “There are a few key points that make TCA difficult to calculate, but there are ways to handle it and meet each client’s needs,” said Ben Londergan, Dash Financial president.

“There are 15 venues to execute equity options in the U.S.,” Mr. Londergan said. “Then there are different ways to place orders and execute orders. That complexity lends itself to meet the more specific needs of each investor. Computation might be simple, or it might be a complex algorithm. It depends on the investor.”

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