Brokers Tap Execution Cost Management Technology Mar 19, 2009 URL: http://www.advancedtrading.com/showArticle.jhtml?articleID=215901166
Projects that brokers who mine critical variable cost considerations with execution cost management (ECM) technology gain in three distinct ways, according to a recently published report by TABB Group called "Execution Cost Management: Improving Margins, Strengthening Relationships." By lowering net trading costs, trading profit margins will improve. By sharing trade routing and costing information with buy-side clients, brokers can differentiate themselves from their competition. Third, by incorporating the data into client-profitability models, they will be better able to measure the value of each client relationship.
"Brokers who can demonstrate how execution costs are managed," says TABB Group's Matt Simon, research analyst and author of the report in a release, "and combine this analysis with transaction cost analysis (TCA), will gain a more holistic analysis of servicing, including arriving at fair commission rates that will assist the buy-side in understanding how execution costs impact trading decisions."
According to Simon, "Today's market conditions are driving more brokers to lower net trading costs and to quantify these trade-cost savings in order to measure broker-trading performance in light of executions costs as well as quantifying the value of their client relationships. Effective ECM requires an accurate, granular dataset as well as the right tools to monitor trading decisions and track results. When properly implemented and managed, ECM solutions provide a roadmap to increased trading margins while serving as the keystone to tracking client profitability.".