Proquote Launches Best Ex, TCA Solutions

Proquote, the data vendor subsidiary of the London Stock Exchange, is launching two new services for the retail stockbroker and institutional market—Best Execution and Transaction Cost Analysis (TCA)—to address the best execution requirements of the EU's MiFID regulations.

The TCA service is currently in beta testing with a client, while the exchange will begin collecting all of the data for the Best Execution product as of the first week in December. Officials decline to comment on the pricing of the new services.

The Best Execution service provides reports in two formats. Outlier reports examine all of a firm's trades to identify trades executed outside of the touch price. Single-trade reports allow users to query specific trade details on an ad hoc basis.

Specific trade details include insights into price improvements. "Not only can you look at whether I'm trading within the touch, but also an average of what everyone else is doing in the market, which to me is a more interesting benchmark," says Mark Ford, head of product management and operations for Proquote.

When a user of the best execution service polls the RSP (Retail Service Provider) network and then executes a trade, the application also stores the price and size that each RSP is quoting. Another piece of data included is the settlement date for a trade. "The settlement date is always T+3 on book, but RSPs go up to 25 days [and] sometimes the RSP will impose a cost of carry," says Ford. Users can also provide their RSP fee schedules to Proquote to import into the application.

The Best Execution report also includes a snapshot of the last five trades in the market at the time of trade, and can then be converted into a printable, broker-branded PDF report.

The TCA product provides a user interface to collect trade details, including the equity, size of order, explicit costs, price attained and the time period over which the trade was executed. A report is then generated providing details of the market over that time period and comparing actual execution costs to a range of benchmarks.

"We have multiple benchmarks that we can use… VWAP, TWAP or the median price," says Ford. "We also offer the order book optimal price—[what you would have achieved] if you perfectly timed it over the time period."

The TCA application also stores order book data from all major European exchanges, allowing users to play back that data.

TCA combines its analysis into a printable two-page report that includes the shortfall against various benchmarks, charts of the optimum time to have executed the trades, analysis of market liquidity, number of trades outstanding, as well as details of the larger trades and volume analytics.

Both services will be delivered via Web sites supported by a dedicated database storing the seven years of data required for regulatory compliance.

The Web-based delivery of the services means that little or no integration is required. "We already have all the trading information… coming through from Plus Markets, Virt-x and the LSE… [plus] all the RSP quotes and the trades of the individual organization if they are using our trading network," says Ford. For clients that aren't currently using Proquote the vendor can import a firm's trading data.

Should they prove successful, Proquote is also prepared to include data from new venues, such as Instinet's Chi-X, Equiduct and the proposed MTF from seven leading investment banks, Ford says. "The system has been built to be multi-venue… so it's easy just to add another one. We already have three to start with, so adding a fourth wouldn't be a problem," he says.