Where does NCFX Data come from?
NCFX data is created by aggregating live feeds from multiple FX ECNs. We take no data from any underlying price maker directly to ensure that the rate cannot be manipulated whilst being representative of the market midrate at any given time.
How often does NCFX produce a rate?
We produce a rate every 50 milliseconds in 70 commonly traded pairs that have sufficient ECN coverage to create a reliable midrate that cannot be manipulated. In less liquid pairs we produce rates periodically, usually once a minute or so, and the picture with forwards is much the same.
What product coverage does NCFX have?
We provide midrates in Spot, Forward, NDF and Restricted Currencies. We have no coverage in Options at this stage. We produce midrates in 2,500 spot pairs, and we now have approximately 8,500 different forward tenors.
Why does NCFX focus on data?
NCFX believes that independent data is key to accurate measurement. If a bank knows where a client is getting their TCA measurement data from, they will be tempted to execute that client’s business in that venue in order to minimise costs and look like they are doing a better job than they are. If the data comes from inside the cost-chain, it can’t be relied upon. NCFX data stands outside the cost chain and is therefore reliable and can be used for accurate measurement.
But surely FX is the world’s most liquid market and it just doesn’t matter…
The liquidity of the FX markets is systematically overstated. It is high, but not that high. The BIS data from 2016 indicates that at the very busiest time of day in the busiest currency pair (EURUSD), an average maximum flow rate of USD 14.4 million per second is achieved. This is for the whole market. As clients seek to execute large trades in a market that operates in milliseconds, it becomes clear that information transfer in this illiquid environment is of significant importance.
Why should I pay NCFX when I can get my bank to pay for FX Transaction Cost Analysis?
If a bank adds a specific TCA fee to its price through the spread then the Asset Manager must prove that without this fee the FX cost would actually be higher. Adding a spread to a client to pay for TCA inherently results in best execution not being achieved if the bank was willing to make the same price to the client with or without the TCA fee. In our view TCA costs should form part of the asset manager’s common Execution Policy for all clients and not be borne by the underlying investor. A fee added to a rate pushes the Asset Manager’s cost onto the client.
How much does NCFX charge?
We charge a maximum fee for TCA of GBP 36,000 per annum for TCA. We are able to undercut other providers because we own our data, and all TCA is run and managed on our own platform.
Can I automate the TCA process?
Yes. NCFX provides a fully automated service whereby files are taken from client OMS or EMS, are transferred to an SFTP location either inside or outside the client environment depending on security policies, and the results are automatically (and more or less instantly) appended to the client results file. We are strong believers in security and eliminating manual processes.
How do I see my TCA results?
We offer a choice of ‘in-app’ multi-layered dashboard (see one screen below as an example), bespoke Power BI data visualisation or Excel/CSV output for use in other BI software such as Qlik or Tableau. We operate traffic light systems if required, and can structure the visualisation to suit the business. For example, if different departments need different reports, then that is simple.
Can NCFX automate RTS 28 reporting?
We can provide an automated RTS 28 data summary from the client data files. The output can be put into whatever form is required by the client, or added to a website if necessary. In addition, we provide all manner of reporting structures against different benchmarks so that the benchmarks designed into the client’s Execution Policy can be reflected in the TCA output and the required process of comparison and improvement can be undertaken.
Which calculations can you supply?
We calculate the following benchmarks, depending on the richness of client data:
• Delay Cost
• Effective Spread
• Realised Spread
• Implementation Shortfall
This enables construction of an Execution Policy around suitable benchmarks.
What should I be paying for FX?
That’s a tough one! Costs for unmeasured FX portfolios are usually higher than USD 500 per million dollars traded. Clients who measure costs can expect to see costs between USD 150 and 200 per million, and clients that wish to push things further might get to USD 70 per million. Clients that recognise that they own liquidity and are prepared to trade like a bank could actually beat mid.