Toomre Capital Markets LLC

Real-Time Capital Markets -- Analytics, Visualization, Event Processing, and Intelligence

Transaction Cost Analysis or Real-Time Enterprise Risk Management??

Recently Toomre Capital Markets LLC was challenged to suggest what software should be used to implement a “Transaction Cost Analysis” application in a cost effective manner. The original description of the desired application seemed simple enough: provide an analytic tool to allow any investment professional across the organization to easily assess in real-time the effectiveness of a realized trade execution vis-à-vis a theoretical ideal. However, what this “simple” inquiry evolved into was a detailed discussion of what would be required to move from their current technology environment to one that allowed for real-time analytics, reporting and compliance monitoring – in short, real-time analysis and enterprise risk management across their several trading areas.

The inquirer elaborated that their current technology environment utilized data feeds from Reuters and Comstock for equities, GovPX for Treasuries, another from an unnamed prime brokerage and yet one more from an Order Management System (“OMS”) vendor. Bloomberg terminals provided additional information, but were not electronically linked to their internal systems. Primary investment decisions were focused around trader/portfolio manager Excel worksheets which also passed trade and position information back and forth with their “back office” system. Their analytics group uses their own unique applications that utilize both historical price information and the current market data feeds. Their middle office (e.g. “risk management”) utilizes market and transaction data from all sources to assess risk and control limits. Senior management receives summaries from all functional areas on a periodic basis.

The above description is similar to many investment firms formed in the last decade. This inquirer approached Toomre Capital Markets as a result of a recently commissioned mongraph entitled “The Future of Real-Time Enterprise Risk Management” which focuses on moving from periodic reporting to a real-time environment. TCM welcomes the opportunity to discuss these subjects of “Real-Time Enterprise Risk Management” and “Transaction Cost Analysis” with other interested investment professionals. Please feel free to contact us directly or to leave a comment here.