Trading technology provider Tora has launched an artificial intelligence (AI)-driven tool for pre-trade transaction cost analysis (TCA), which enables traders to monitor costs across the lifecycle of a trade and improve the decision-making process based on new insights.
Under requirements in the revised Markets in Financial Instruments Directive (Mifid II), which come into effect on January 3, 2018, buy-side firms must take a number of steps to deliver and demonstrate best execution to investors and regulators.
Therefore, investment firms need to monitor execution quality in terms of “price, costs, speed, likelihood of execution and settlement, size, nature of any other relevant consideration,” according to the rules.
Gerrit Van Wingerden, managing director of Japan at TORA says: “The key challenges of pre-trade TCA are the aggregation of all brokers and their respective algos into a common platform, the integration of the pre-trade TCA tool into a firm’s overall trading process, and the ability of the TCA tool to process massive amounts of historical data and continuously capture and integrate new order data as soon as it becomes available.”
TORA’s TCA solution is built on a convolutional neural network that is trained using real-time and historical data. TORA uses machine-learning algorithms to continuously capture new order data as it becomes available. Wingerden says the network is trained with various attributes of the order such as spread, volume and volatility
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