Fixed Income
July 2006
GSCS Information Services’ today announced the next stage of implementation of its fixed income transaction cost research product. GSCS has been monitoring and analysing transaction costs for fixed income securities for more than twelve months and has built up significant experience in dealing with the particular nuances of fixed income analysis compared with that for equities.

In evaluating fixed income trading, challenges of analysis in relation to pricing sources, country of issuer, currency, and the market traded as well as those of maturity, duration and credit rating have already been overcome by GSCS and it has successfully provided its basic analysis to a number of clients. “The traditional perspective of TCA for bonds was relatively simple; taking the execution price for the bond and comparing it with one or more price benchmarks in a fashion similar to that used for equities.” said Robert Kay, Managing Director of GSCS. “However there was a big challenge in getting data and analysis and benchmarks were limited, revolving around time weighted averages and point in time measures for slippage calculations.”

As a result of what it has learned GSCS, is now developing further enhancements to its fixed income service to allow for more sophisticated analysis. Most importantly this allows calculations that take account of general market movements in assessing performance. “Many bonds are traded on a spread basis rather than outright price. Our service will allow clients to assess the attractiveness of the spread achieved as well as the actual price obtained. It will also let clients report unsuccessful bids received from dealers.” says Kay. Assessing the spread brings the analysis in-line with how trades are actually executed by clients. Reporting of all bids will enable clients to meet their best execution requirements for MiFID.

As well as improving its fixed income services, GSCS plans to shortly launch services covering derivatives and commodities to allow clients to cover all MiFID reporting requirements for best execution from a single vendor. “We believe that clients, especially those in Europe, want to deal with a single source that covers all asset classes in terms of post-trade transaction cost and best execution.” concludes Kay. “GSCS is responding to this significant challenge in ways that will help our clients meet their compliance and client reporting objectives as well as supporting trading activities.”