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New Analytics on the Way: But integration will be the key

Traders Magazine, November 2005

Richard Johnson

To manage orders effectively in an increasing electronic market, traders need real-time cost and risk analysis tools integrated directly into the trading process. When looking at the US equity market over the last several years, it is interesting to note that the evolution of trade analysis, has been moving backwards. First came post-trade transaction cost analysis, and with it the volume weighted average price (VWAP) benchmark, as an easily understandable performance metric. Then came the first generation of algorithms, which aimed to achieve the VWAP by feeding orders into the market following a typical volume schedule. Now the industry is at the point where buyside traders have access to comprehensive trade analysis services, a battery of broker algorithms integrated into the order management system, and are looking for pre-trade analysis tools to help them select the right algorithm to achieve their goals.

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