Rosenblatt... 

Connecting Your Trading Desk to the Investment Process

Rosenblatt Integrated Transaction Analytics

The Problem: Transaction cost analysis began as a compliance and/or marketing tool and to this day remains just that for some firms. For many others though, it has now become an essential part of the execution process. Nevertheless, transaction cost analysis tools have still not been able to realize their potential as they are often trading desk myopic and have not been fully integrated into the investment process.

The Solution: The next step in the evolution of transaction cost analysis is to look at the investment process and execution process more holistically, connecting them rather than allowing them to co-exist, divorced from one another. RITA, our solution, provides an integrated framework for achieving consistency in alpha capture rather than simply providing the pre-trade estimates and post-trade reports to which trading desks have become accustomed. Three of the seven steps in our process actually occur even before the pre-trade estimate is calculated, a place where many other providers start, allowing us to gain a true understanding of the investment style, portfolio manager’s motivations and trading environment in order to maximize alpha capture.

Our Offering: Working as a value-added advisor, we not only assess trading performance on the trades we complete for you, but also work to help you improve performance on all of your trades. We help produce urgency estimates, classify orders and develop decision trees, as well as eliminate the frequent confusion between benchmarks and strategies, which can include helping you choose appropriate algorithms, in order to more closely link trading to the investment process. Our analyses include the ability to track trades over multiple days as a trade package to map the trade trajectory and alpha capture. We also can assist with international trading strategy in EAFE countries. Our post-trade reports are customizable and user-friendly as they are generated with visualization software. Execution performance is compared relative to proprietary pre-trade market impact estimates, common benchmarks such as arrival price, close, prior close, VWAP and interval VWAP, and other proprietary measures such as execution efficiency. For a more detailed description of our unique approach, see our article in the summer 2006 Journal of Trading “A Brief History of TCA, Its Shortcomings, and a Proposed Framework for Integrating Trading into the Investment Process.”

The Difference: Our sweet spot is not collecting data for compliance/marketing purposes or producing thick, glossy quarterly reports, but rather the interpretation of data for actionable insights for trading strategy/tactics that help achieve investment process goals. Our tools were developed by a buy-side practitioner with seventeen years experience as head trader, portfolio manager and trading strategist at some of the most recognizable names in the asset management industry.