Investment managers understand better than anyone, the challenges of equity trading and the need wherever possible to keep transaction costs to a minimum. Buy-side traders are required to balance a broad array of considerations on any particular order. On rare occasions they may have complete freedom to determine exactly how the order is executed. More often they face constraints that may include any of;

1) price constraints (a portfolio manager has specified a price limit beyond which the trader cannot go)
2) timing constraints (an order may need to be completed, within a given period of time - sometimes measured in minutes or hours - to meet cash flow requirements, investment dynamics or other factors)
3) broker constraints (an order may need to be placed with a given broker because of research or other factors)
4) information constraints (the portfolio manager may want to restrict the brokers who are aware of their desire to trade)

These constraints affect how an order is completed. Even where total freedom exists, traders recognise that there may be trade-offs between market impact (the cost of achieving immediate execution working with a dealer who may need to commit capital) and cost of delay (working an order over an extended period to minimise market impact). The information value of the trade will also need to be taken into account when determining an execution strategy.

To the greatest possible extent the “context” of each trade should be reflected as accurately as possible in any analysis that is undertaken. To this end GSCS has launched its Landscape analysis service. This shows numerically and pictorially the nature of trades being executed and identifies the types of trade where the buy-side trader has most opportunity to positively effect the outcome. This approach also reduces the risk of drawing erroneous conclusions about trading performance. In many cases the trading outcome actually reflects the context of the orders rather than the skills and experience of the trader.

It is also clear that the context, the trade details themselves and the execution strategy being pursued, will affect how execution "looks" compared to any individual benchmark. Using a single benchmark analysis therefore risks managing executions to look good against this benchmark, but at a real cost in terms of how execution might otherwise have been achieved. For this reason GSCS determined some years ago the desirability of providing analysis based on a multi-benchmark approach. GSCS analysis therefore includes all implementation shortfall, cost of delay, market impact and opportunity cost measures commonly available to traders.

As well as context, sophisticated analysis must properly take into account the times (e.g. decision time, release time and execution completion time) involved in the case of each trade. This kind of time-stamp analysis forms an integral part of the service that GSCS provides to its investment manager clients. Standard analysis is supplemented by a custom analysis based on factors critical to managers themselves. GSCS allows managers to define as many as six "user defined fields" which can be used to provide a vast array of reports, both on-line and in hard-copy many of which are client specific.

Finally GSCS has recognised for some time that many of its clients manage both fixed income and equity securities. As a result they are looking for a service that takes account of as many asset classes as possible. In addition to equities GSCS already has in place a service for fixed income, including all government, agency and corporate bond markets. Analysis and presentation are integrated with equities where appropriate though differences in a number of areas are also taken into account within the analytical framework used.

Equities

Fixed income

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