SPREAD AND MARKET IMPACT COSTS

Values are displayed in both basis points and USD cash amounts. Positive values represent costs incurred by the client (i.e. spread paid). When aggregating over multiple trades, average values are volume weighted. Total USD cash amounts for multiple trades are also available.

SPOT ACTUAL SPREAD

Cost arising from the spot component of the trade or portfolio in question, calculated by taking the difference between the executed spot rate for the trade and the market spot mid price estimated for the same, or closest, time stamp of the trade.

SPOT EXPECTED SPREAD

Estimated spot spread cost for the trade, represented as a cost in basis points (spread to mid), thereby taking into account size, time of day, liquidity etc. Expected costs are computed using the BestX fair value cost model, more details available upon request.

FORWARD SPREAD

Cost arising from the forward component of the trade or portfolio in question. The actual executed forward points are computed and compared to the market mid forward points for the tenor for the closest possible time stamp.

TOTAL SPREAD

Total actual cost for the trade or portfolio, calculated by summing the Spot Actual Spread and Forward Spread.

SPOT ACTUAL IMPACT

Estimate of actual market impact, measured as the difference between the executed rate and the top of book bid/offer. Thus, this value is a sub component of Spot Actual Spread.

SPOT EXPECTED IMPACT

A measure of the expected market impact for a given trade or portfolio, as estimated by the BestX fair value cost model.

NETTING BENEFIT

An estimation of the cost saving realized through the netting of orders and trading as a Block. The metric uses the BestX expected cost model to compare the expected cost of trading the gross set of orders vs the net Block trade. Only present if the portfolio has Block trades linked with a Parent Order ID.


RANGE OF THE DAY

A simple graphical representation is provided of where the executed price for a given trade falls within the high-low price range witnessed during that trading day.

PERFORMANCE VS BENCHMARKS

A positive value implies the client execution price is better than the benchmark value.

RISK TRANSFER PRICE BENCHMARK

Represents performance against the fair value risk transfer price of the trade as estimated by the BestX Fair Value Risk Transfer model.

TWAP BENCHMARKS

TWAP benchmarks, computed from independent mid-market data, are provided showing trade performance over various timescales:

  • 1 Hr TWAP – average mid-price over the hour following the trade
  • Interval TWAP – average mid-price while the trade was active (used for trades executed over a window of time, such as algos)

WMR FIX

Performance against the spot WMR fixings is also available for those users that subscribe to the Reuters WM benchmark data feed. All hourly fixings are available.

ARRIVAL PRICE BENCHMARK

Performance against the observed arrival mid, snapped at the supplied market arrival time stamp for a given trade (if available). If market arrival is not supplied, the benchmark is computed relative to the completion time stamp.

SHARPE RATIO

Simply the average benchmark performance in basis points divided by the standard deviation of benchmark performance in basis points.


PRE- AND POST-TRADE REVALUATION

Analysis of the market moves in the appropriate currency pair, prior and post the execution time. A comparison of the client price paid with mid at intervals of +/- 1 seconds, 30 seconds, 5 minutes and 30 minutes is provided and can be used as additional information regarding potential market footprint and impact. An additional option is available that provides millisecond granularity.

A positive value implies the client execution price is better than the benchmark value.


SIGNALING RISK MEASURES

Only computed for Algo trades where child order data is available.

BESTX SIGNALING RISK

This score is a measure of the auto-correlation of the individual child order execution prices with the underlying market, and is bounded between and  The higher the number, the higher the relative signalling risk.

BESTX SIGNALING SCORE

This metric is a form of Sharpe Ratio estimated over the execution window, and can be thought of as a form of ‘signal to noise’ ratio.

A high BestX Signalling Score number indicates that the participation rate of the order was too high relative to the underlying market, i.e. the market has not digested the order well, potentially resulting in information leakage. As with the BestX Signalling Score it is best used as a means of relative comparison between trades.

FILL SPEED

The average time in seconds that the algo has taken to fill 1m USD notional equivalent.


FILL INFO

Child fills plotted over the life of the algo, versus prevailing market bid offer spread. The size of the bubble represents the notional size of the child fill. Cumulative average fill price of the algo is also plotted, together with the cumulative volume.


IMPLEMENTATION SHORTFALL

A post-trade metric to show the slippage versus a range of time stamps defining the trade lifecycle. 

The application currently supports 4 time stamps per trade:

1.       Order Origination (i.e. when the portfolio manager decides to trade)
2.      Desk Arrival (i.e. when the order arrives with the Execution Desk)
3.      Order Submitted (i.e. when the order is first submitted to the counterparty or market directly)
4.      Order Completed (i.e. when the order is fully filled)

The chart displays the difference in executed price and the prevailing market mid for each of these time stamps, showing the ‘shortfall’ or slippage for each stage of the order process in basis points.


BEST EXECUTION FACTORS AND SUMMARY

A) COST

SPREAD COST

Spread cost is the measurement of the actual cost per trade as a spread to the BestX computed mid for the trade execution time stamp. The actual cost is compared to the expected cost calculated using the BestX fair value model. The traffic light definition is provided below:

Green if Actual Spread is less than 70% confidence interval of Expected value
Amber if Actual Spread is between 70-90% of the confidence interval of Expected value
Red if Actual Spread is greater than 90% confidence interval of Expected value

IMPACT COST

Impact cost is the measurement of the actual instantaneous impact per trade as a spread to the BestX computed top of book bid or offer for the trade execution time stamp. The actual impact is compared to the expected impact calculated using the BestX fair value model (further details available on request) (reference). The traffic light definition is provided below:

Green if Actual Impact is less than 70% confidence interval of Expected value
Amber if Actual Impact is between 70-90% of the confidence interval of Expected value
Red if Actual Impact is greater than 90% confidence interval of Expected value

DELAY COST (IMPLEMENTATION SHORTFALL)

Delay Cost is represented within the Implementation Shortfall section, which is a post-trade metric measuring the slippage from order origination, i.e. between the following time stamps:

1.       Order Origination (i.e. when the portfolio manager decides to trade)
2.      Order Completed (i.e. when the order is fully filled)

The traffic light definition is as follows:

Green if market has moved in favour of client since origination by > 0.2bps
Amber if market has remained within +/- 0.2 bp range
Red if market has moved against the client since origination by < -0.2bps

Please note: this factor will only be computed if the client supplies a trade origination time stamp, otherwise the factor will not be visible.

B) PRICE (BENCHMARKS)

Under the MiFID II definition of best execution, one of the key factors referred to is Price. For the purposes of the BestX implementation we have implemented this in the form of Benchmark performance, and the factor has been relabeled as Price.

The overall weighted benchmark performance is now calculated for the purposes of defining the colour of the traffic light for Benchmark (or Price) factor

The traffic light definition is now as follows:

Green if the total weighted benchmark performance > 0
Amber if the total weighted benchmark performance = 0
Red if the total weighted benchmark performance < 0

C) SPEED

 

This factor measures the slippage from market arrival, i.e. between the following time stamps:

1.       Market Arrival (i.e. when the order/trade arrives at the market)
2.      Order Completed (i.e. when the order is fully filled)

The traffic light definition is as follows:

Green if market has moved in favour of client since arrival by > 0.2bps
Amber if market has remained within +/- 0.2 bp range
Red if market has moved against the client since arrival by < -0.2bps

Please note: this factor will only be computed if the client supplies a market arrival time stamp, otherwise the factor will not be visible.

D) POST-TRADE REVALUATION

The traffic light definition is as follows:

Green if market has moved in favour of client at the 30s reval point by > 0.2bps
Amber if market has remained within +/- 0.2 bp range at the 30s reval point
Red if market has moved against the client at the 30s reval point by < -0.2bps

E) SUMMARY

In line with the MiFID II best execution requirements, an overall summary of the factors has been introduced in the traffic lights. This Summary factor is an aggregation of the individual factors selected by the specific client, so the factor is specific to that institution and their chosen priorities/weights within their best execution policy. It is therefore not comparable across clients.

The traffic lights are shaded according to the selected factor weighting.

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