24 April 2017.
Plato Partnership and LiquidMetrix Research to co-operate to assess block trade performance Plato Partnership Limited (“Plato Partnership”), a not-for-profit company bringing creative solutions and efficiencies to today’s equity marketplace, today announces its intention to enter into a cooperation agreement with LiquidMetrix, the best execution specialists and an operating division of Strategic Insight (SI). Under this new partnership, the two companies will research, design and implement a stronger methodology for assessing block trade performance.
Through this cooperation, Plato will work with the LiquidMetrix research & development team to jointly design and implement a consistent framework for assessing block trade performance. This will enable firms to assess the execution quality achieved by block trading both in absolute and relative terms between different block venues versus other execution options.
MiFID II will have a significant impact on many aspects of trading in Europe. Limits on dark pool trading and the disappearance of current BCN models are likely to drive innovations in how and where trades are executed. RTS 28 requirements on sell sides and buy sides will focus attention on how effective firms are in sourcing liquidity and achieving best execution for their clients in this new landscape.
Mike Bellaro, Plato Partnership Co-Chair, commented:
“If block trading is to become more widely adopted we need a comprehensive and universally accepted framework for measuring block execution quality. This is exactly what we are looking to develop with LiquidMetrix. To date, traditional Transaction Cost Analysis has not done a good job in allowing such relative comparisons to be made. Block trading analysis requires careful risk adjusted measurement of performance to allow fair comparisons with algo trading. TCA often focusses mainly on what is completed, ignoring or side stepping opportunity costs.
“We are delighted to be working with Strategic Insight’s LiquidMetrix team to bring a solution to the market. This cooperation again demonstrates our commercial focus and ensuring that we are delivering significant utility for our members and the market as a whole.”
Nej Djelal, Plato Partnership Co-Chair, commented:
“An industry standard form of Transaction Cost Analysis has long been recognised as a key opportunity for the industry, but to date has been challenging to achieve. Plato Partnership’s unique positioning as a body that brings together the intelligence and guidance of both buy and sell sides, underpinned by our not-for-profit ethos, means we are well placed to spearhead the move towards TCA standardisation.
“In anticipation of the market’s likely shift towards trading in larger sizes following the implementation of MiFID II, the logical first step is to focus on block trading TCA. This exciting development will enable objective performance analysis of block trading versus alternative approaches, as well as lay the foundation for further TCA standardization.”
Paul Squires, Plato Partnership Member, commented:
“There are a number of areas – including increased standardisation for reporting optimisation – where we want to see significant benefits brought to the market in delivering the regulatory expectations of MiFID II. Ensuring we get ahead of the curve to provide the market with solutions that will drive genuine utility is absolutely central to Plato Partnership’s values, and this cooperation is another example of this strategic approach.”
Sabine Toulson, LiquidMetrix Co-founder, Strategic Insight, commented:
“The LiquidMetrix mission is to provide leading edge analytics for all of the financial services industry including the buy-side, sell-side and trading venues. As regulatory and technological innovations continue to drive changes in market structure, the financial community must continue to adapt in order to provide meaningful best execution reporting.
“Block trading appears to be re-emerging as an increasingly viable trading option. At the same time, MiFID II requirements specify the need to justify the different execution strategies and policies used by a firm. There is a clear need for a new generation of meaningful block trading metrics that demonstrate execution quality for the industry. Strategic Insight is pleased to have the privilege of collaborating with the Plato Partnership, and in using LiquidMetrix experts to develop a modern platform that the entire industry can use for effective measurement of block execution quality.”