FXall launches EQA benchmarking tool

Institutional forex trading platform FXall has formally launched its new buy-side benchmarking tool, Execution Quality Analysis (EQA), after a 12-month period of client testing and development.

As reported by FX Week in March, EQA is a form of transaction cost analysis (TCA) technology developed exclusively for institutional foreign exchange traders to help them analyse their strategies and identify opportunities to improve performance.

The EQA product reviews the results achieved using the execution mechanisms and liquidity providers available on FXall, providing a comprehensive summary of spot, forwards and swap trades executed during a given time period. It covers the most actively traded currency pairs, according to FXall's New York-based chief executive Phil Weisberg.

"We have been piloting this for some time with a select group of clients and getting their feedback, and we feel we have arrived at a standard set of reports, endorsed by clients, so we are ready to distribute it more widely," says Weisberg.

TCA in equity markets has been increasingly popular on buy-side trading desks in recent years as it enables traders to prove best execution. Although a number of providers have made efforts to extend their TCA offerings to FX, it is far more challenging to do TCA in FX than in equities, according to Weisberg.

"The standard TCA methodology in equities is based on robust data from all venues. When you're trying to accomplish the same objective in an over-the-counter market such as FX, you have additional complexity as there are so many more ways in which trades can be executed and the market data is much more fragmented. In developing EQA, we were conscious that bad data is worse than no data at all, so we have really tried to hone our reports to make sure they are genuinely useful for clients," says Weisberg.

EQA is FXall's first exclusive product in this space, although it has previously provided data for a similar venture. In May 2010, New York-based electronic trading provider Investment Technology Group (ITG), which specialises in TCA for equities, announced the launch of ITG TCA for FX, based on benchmark data provided by FXall.

Earlier this year, ITG revealed it was working on a second phase of the product as clients had demanded a broader set of benchmark data than that provided by FXall. "What we have discovered from talking to our clients is that the desire for a foreign exchange TCA product definitely exists, but the demand for breadth and depth in that service is certainly more than we would have anticipated working solely with FXall," ITG managing director Ian Domowitz told FX Week in March.