Using BankMinder to optimize counterparty execution
Transaction cost analysis provides the foundation for evaluating execution quality across counterparties. TCA measures capture both explicit costs (spreads), and implicit costs (drift), revealing which banks consistently deliver competitive pricing. BankMinder allows you to pick weightings for these metrics to optimize counterparty selection.
Key TCA Metrics
- Batting average: The hit ratio for the given currency pair and trade type.
- Bank speed: The quote response time vs. the competition, shown as a value between 0 and 1.
- Total Cost: The combination of Spread to the market mid-rate, Skew and Drift in Cost Per Million (CPM).
TCA Scoring
BankMinder allows users to set weightings for each metric, or benchmark. Research shows that sophisticated clients can achieve spreads 10–15 pips tighter than unsophisticated counterparts through better bank selection and platform utilization.1
1 Harald Hau, Peter Hoffmann, Sam Langfield, and Yannick Timmer, “Discriminatory Pricing of Over-the-Counter Derivatives,” IMF Working Paper WP/19/100 (Washington, D.C.: International Monetary Fund, May 2019).
