George Rodriguez
Algorithm Trading Solutions will within a month launch a new transaction cost analysis tool that will, for the first time, compare performance of algorithms from across the industry based on the investment objective the trader wants to achieve. Currently, most brokerage firms develop TCA tools to measure how their own algorithms are performing based on pre-set performance benchmarks such as Volume-Weighted Average Price [VWAP], but none evaluate their own performance against their peers. Buyside clients, moreover, have to rely on a handful of industry-wide studies to compare performance of algorithms by major algorithm providers. "Many TCA tools are very basic for today's trading environment," said George Rodriguez, managing director. "This will provide more of an apples-to-apples comparison for institutional investors." ATS' TCA tool will allow traders to measure how popular algorithms work for their particular custom strategies. Competition has recently heated up in the TCA area, with some vendors such as FutureTrade jumping into custom performance measurement (WSL, 2/24). ATS should be able to differentiate from similar offerings with its cross-firm tool comparison, one hedge fund manager said. Buyside traders could potentially use the tool to improve execution by quickly switching between algorithms while trading to maximize trade performance, he added.