Lesson 20 of 21 · Bond Trading Automation
Pre Trade TCA
The overbond academy will help you understand fixed income market fundamentals
What this shows: Distance to mid-price of executed trades, by liquidity tier: less liquid tiers show wider, more negative tails.
Tier 3: 86 trades, median cost -18.8k dollars versus mid.
Pre Trade TCA
Pre-trade transaction cost analysis (TCA) is used to determine the execution strategy that will minimize the transaction cost of a planned trade at a given level of risk.
TCA has traditionally been a post-trade exercise, was reported with a significant lag and calculated using only the difference between the trades of a given broker and the volume-weighted average price of the desk’s transactions. The development of new AI models now allows for rapid calculation and the inclusion of more variables. TCA reporting engines now provide real-time pre-trade and post-trade analytics and broker-choice algorithms.
The Overbond AI-driven TCA engine looks back through OMS records and blotters from past transactions for similar bonds (ISIN/CUSIP), looking at multiple variables including risk, liquidity, size, counterparty, RFQ competitiveness and dealer quotes and inventories then aggregates the data and determines best