Unlocking the Power of Trading Data

Succeeding in the world of business today means making the most of data. As financial markets become increasingly complex and fast-paced, traders and investors face growing challenges in making informed decisions. One of the main obstacles they face is a lack of transparency in trading activities, which can make it difficult to identify trends, potential risks, and business growth opportunities.

Navigating the murky waters of trading data

For several years, we have been carrying out extensive analyses of the role of execution data in automating trading and improving its quality. It soon became evident that a state-of-the-art analytics platform is no longer an option but a necessity. Brokers that do not realize what wealth trade analytics offer are leaving serious value on the table.

Digitalization, automation, increased use of sophisticated technologies, algorithmic strategies, and regulatory changes in the financial markets continue to alter the trading landscape. Ever-growing fragmentation of liquidity across multiple trading platforms and greater complexity of execution strategies are constant challenges for market participants. Therefore, TCA has received considerable attention in the trading industry. Detailed measurements of algorithms, brokers, and venues have rapidly become highly important. With good data analysis, you can identify commonalities, insights, and trends. These large data sets have become a core asset in the trading sector, fostering automation and innovation and creating significant competitive advantages.

Our journey

Since 2015, when we began our journey with execution data and TCA, there has been a surprisingly swift uptake of the calculation methodology and technology in the data analytics space. It has been a sea change in the way trading data is used today. Keeping up with the latest advancements can be onerous, but having full order transparency is worth the effort. Robust analytics can help us understand the business and uncover new sources of revenue and growth opportunities.

With equal focus on two key resources, human and technological, we decided to build the TAP™, which complements Vontobel’s suite of B2B electronic trading solutions. The idea to launch the TAP™ was both exciting and challenging. The ultimate goal was to create more value for the Bank and our clients. Therefore, starting with a clear focus was crucial. Without setting the right direction, it is easy to get lost when dealing with the vast amounts of data and divert resources to less relevant matters.

With that in mind, we aimed to develop a solution that would support our clients and us in meeting regulatory obligations under various financial regulations imposed by the Swiss Financial Market Supervisory Authority (FINMA) and the European Securities and Markets Authority (ESMA). As it turned out, the end result would cover much more than regulatory requirements. With the information included in the TAP™, we can leverage the trading data in business decisions and processes, with impressive results.

Focusing on analytics to solve real business problems

By leveraging trading data and advanced analytics techniques, we gain in-depth insights into market dynamics, client behavior, trading strategies, and operational efficiency. We use the power of analytics to solve real business problems and maximize benefits for our clients.

Trading data refers to the information gathered during the execution of an order, including the price, volume, time of trade, and execution venues. To fully understand the total cost of execution, we apply TCA metrics from an independent provider. By buying benchmarks from a non-indigenous source, we ensure full objectivity in assessing the quality of execution.

Reducing trading costs

One of the real problems that trading data helps us solve is how to reduce trading costs. Detailed analysis of the costs associated with executing orders, including explicit costs (such as commissions and fees) and implicit costs (such as market impact and bid-ask spread), allows us to identify areas where orders may be incurring unnecessary costs. Markets and brokers offer diverse pricing models. Cost analyses in conjunction with performance studies provide valuable findings, helping us identify the most cost-effective services providing the best value for our business.

Tracking performance and quality

Another problem that can be solved by applying insights from trading data and TCA metrics is improving execution quality. The TAP™ considerably increases transparency and enables its users to make informed decisions based on accurate, up-to-date information. Every order handled on the Vontobel Execution Platform is compared to that of industry peers trading under the same conditions to systematically assess execution quality.

Choosing the best brokers

Depending on market or trading access characteristics, an order may be transmitted to third-party financial institutions (e.g. brokers) for execution. Trading data and TCA benchmarks are essential tools for choosing the best brokers. By analyzing detailed metrics designed to track efficiency and accuracy, traders can compare the performance of different counterparties. Insights related to execution quality help identify those brokers that are consistently performing well and are likely to deliver better results.

Improving algorithmic strategies and decision-making processes in our smart order router

As the ecosystem of execution algorithms grows more and more complex, there is no one perfect benchmark that could be used to measure all order types. We offer our B2B clients a range of automated execution algorithms, developed in-house, and PULS, a smart order router (SOR) for cash equity markets. In order to obtain a comprehensive view of their performance, we precisely monitor and evaluate executions from different angles. With the TAP™, we get all the KPIs we need to understand the performance of each order. This gives us greater control to measure strategies more efficiently and make meaningful decisions on modifications to the design of the algorithm and our SOR’s routing policies.

Providing full order transparency

Transparency promotes accountability. This helps maintain integrity and build trust among stakeholders, including clients. By providing timely information about the market structure, trading volumes, and price movements, transparency allows us to respond quickly and appropriately to changing circumstances.

Ensuring regulatory compliance

The duty of best execution requires brokers to execute clients’ orders on the most favorable terms available under the circumstances. Promoting best execution of clients’ orders and ensuring that sufficient monitoring processes for best execution are in place are of fundamental importance to protect investors and markets. The TAP™ assists execution traders with empirical performance metrics, allowing them to monitor, measure, and manage best-execution obligations.

Identifying new opportunities

By analyzing trading data, we can discover looming market trends, which helps us spot new trading opportunities before they become widely recognized.

Finding out what makes execution strategies successful and what is holding them back

During this journey, it became clear that in order to succeed with data and solve real business issues, analytics strategies need to be driven by an equal mixture of data skills, technology, and creativity. Although data analytics and creativity are often perceived as being mutually exclusive, they complement each other in business settings.

The TAP™ has been an indispensable tool for us. With its powerful data analysis capabilities, we have been able to make better-informed decisions, identify trends, reduce trading costs, and capitalize on market opportunities. We are delighted to be able to offer the TAP™ to our clients. The comprehensive analyses enable them to discover new ways to leverage data analytics and visualizations, in order to evaluate the quality of execution and the quality of the broker selection process and gain a competitive edge in the market, improving the overall trading performance.