MarketAxess to Apply New Cost Analysis to Fixed Income Trading

RexIQ methodology will apply a TCA approach to determining the cost of trading in corporate bonds.

Electronic trading platform operator MarkextAxess has announced it will introduce a new methodology, called Reducing Execution Costs or RexIQ, for analysis of trading costs in the fixed income markets.

The new method, patterned after similar transaction cost analysis (TCA) approaches already used to determine trading costs in liquid markets like equities, will be the first of its kind for the less liquid corporate bond markets, MarketAxess says.

RexIQ will use Finra's TRACE corporate bond market data to compare electronically executed trades to "prevailing market price", with the difference representing the embedded costs of dealer mark-up and fee. The firm's initial research of 150,000 trades with determinable prevailing market price showed a 5.2 basis point savings for trades made electronically.

"RexIQ can deliver insight into the corporate bond market to help fund managers meet fiduciary responsibilities. Our research validates the value of e-trading as a tool in achieving transaction cost savings and improved portfolio returns. Using this methodology, we are providing our institutional investor clients with regular, robust analysis of their execution costs to support their best execution requirements," says Rick McVey, CEO of MarketAxess.