Unit Cost of Volatility (UCV) is a very important and recently announced addition to our data measurement tool kit. UCV allows users to compare all liquidity providers across all market conditions using a regulated independent mid-rate and a ground-breaking calculation of cost.
Measuring FX costs using a price source which is independent of your transacting venue remains a key regulatory requirement for asset managers and the basis of proper measurement for asset owners. UCV will enable dealing desks to easily measure the effectiveness of internal processes by measuring all trading activity against a benchmark which takes into account the size of a trade, the liquidity provider used to execute the trade, the market impact cost of the trade and the volatility conditions at the time of the trade.
In the link below, our head of research, Xavier Porterfield, is in conversation with the Editor of Profit and Loss, Colin Lambert. In the podcast Xavier (8.46 minutes into the podcast) explains the genesis of UCV, its use as a measurement tool and its ability to identify alternative trading regimes particularly those surrounding the use of the WM 4pm FIX.
With this simple to use measurement tool, we believe asset manager and asset owners will be able to substantially lower costs thereby reducing performance drag.