Bloomberg is launching a new pre-trade transaction cost analysis (TCA) model that enables market participants to assess trade cost, daily executable volume, and probability of execution.
The new model provides pre-trade analysis for investment grade and high yield corporate and sovereign bonds across the globe and offers a liquidity tree across various order sizes.
In addition, clients can analyse daily executable volume and probability of execution to better inform their trading and portfolio construction decisions.
They can also run scenario analysis by customising their views on the bond spread and rating, which results in different cost, probability, and volume in potential trading outcomes.
The model has been calibrated based on five years of historical trade information, proprietary to Bloomberg/
It takes into account a variety of factors including side and size of the order, the real-time Composite Bloomberg Bond Trader (CBBT) bid-ask spread and the amount outstanding.
Also on the list are the rating and currency of the bond, and an additional overlay with the bond’s age, term, and time to maturity.
The new pre-trade function was beta tested by PGGM, a Bloomberg Transaction Cost Analysis (BTCA) solution customer, along with Bloomberg’s trading quant research team.
“Reliable pre-trade data for fixed-income is scarce, which makes price discovery and proving best execution a challenge,” explained Jan-Theo Varkevisser, Global Head of Fixed Income Trading, PGGM.
He added, “The product provides us with trusted pre-trade price discovery and an automatic connection to post-trade analysis that ensures a valuable feedback loop for our traders to inform their trading decisions.”
This new model is integrated with BTCA, Bloomberg’s multi-asset transaction cost analysis tool, which is incorporated into the core Bloomberg offering and leverages the company’s breadth of market data, analytical tools, and trading workflows.
Featuring exception-based workflow and customisable reporting, BTCA delivers information users need on demand, along with wide-ranging insight into trading-cost impact and decision support for comprehensive transaction surveillance.
“While trade cost models have become the norm in equities, developing a native model in fixed income markets is an exciting step forward to providing bond traders and portfolio managers with greater pre-trade intelligence.” said Ravi Sawhney, Global Head of Trade Automation & Analytics, Bloomberg.
He added, “The inclusion of pre-trade cost and probability estimates as part of the BTCA offering promotes market transparency and helps bond traders to make decisions that comply with their firms’ best execution requirements. We look forward to being able to offer this and more pre-trade analytics into our suite of electronic trading products in the future.”
©Markets Media Europe 2021