Dam Weerasena
FSI Industry Lead
Andrew Visich
Lead Data Analyst
In wealth and asset management, time is the one actual currency. That isn’t just a figure of speech—the entire practice of transaction cost analysis (TCA) is built on the premise that the precise timing of a trade, within a matter of seconds, can massively impact its profitability. It stands to reason, by extension, that a firm’s ability to quickly and accurately analyze transactions can be one of the most important determinants of its success.
Those capabilities, meanwhile, evolve with the underlying technology. In a recent Medium article, Snowflake’s Christopher Napoli highlights how far market data optimization has come from the introduction of ticker tape in the 1860s, to its digitization as TICK (tick-for-tick) data, to the latest advancements in the Snowflake AI Data Cloud, which make TICK History data easier to leverage than ever.
As a strategic partner, Hakkoda has worked hand-in-hand with Chris and the Snowflake industry team to accelerate our customers’ capabilities and investments to realize the value of TICK history through targeted use cases like TCA. The Modern Asset Management & Business Analytics Accelerator (MAMBA) is one such accelerator, designed to streamline operations and empower firms with impactful analysis by leveraging Snowflake data share through an optimized data model to construct a single version of the truth. MAMBA offers an end-to-end solution that minimizes the time spent wrangling and enriching data, allowing asset management teams to focus on what really matters—making informed decisions.
MAMBA’s Core Features:
- Trader Portfolio View: Dive into the details with insights on weighted market value, portfolio performance, and profit & loss (P&L).
- Risk Management View: Stay ahead with metrics like VaR and Sharpe ratios, segmented by industry, sector, and account/PM.
- CIO Dashboard or Firm-Wide Performance View: Get the big picture with a comprehensive overview of company performance, sector holdings, and P&L.
Introducing Transaction Cost Analysis (TCA)
As MAMBA evolves, so do its capabilities. Enter Transaction Cost Analysis (TCA)—a new, powerful feature designed to elevate trading strategies to the next level. TCA provides an in-depth look at trade execution quality, market liquidity, and trading costs. With TICK History data readily available from multiple sources in Snowflake Marketplace, MAMBA leverages FactSet’s capabilities in its demo to showcase the full potential of this feature.
But what does this mean for your asset management strategy? Let’s explore the key dimensions that TCA unlocks.
The Dimensions of Transaction Cost Analysis
Price Movement Insights
Imagine having a crystal ball for your trades. With TCA’s Pre-Trade Analysis, you can predict potential market reactions by analyzing historical price data. Post-trade, TCA allows you to compare execution prices against historical trends, helping you assess slippage and fine-tune your strategies for the future.
Volume Analysis at Your Fingertips
Liquidity can make or break a trade. TCA’s volume analysis tools help you understand market liquidity and identify optimal trading times. Whether scheduling large trades or looking to minimize market impact, these insights ensure your trades happen when the market is most favorable.
Navigating Volatility with Confidence
Volatility is inevitable, but you’re better prepared with TCA’s volatility analysis. By examining historical price volatility, you can estimate trade risks and make informed trade size and timing decisions. Post-trade analysis helps you correctly attribute performance, ensuring you fully understand the impact of market fluctuations.
Benchmarking for Success
Benchmarking is crucial in measuring execution quality. TCA provides tools like VWAP (Volume Weighted Average Price) to compare trades against market averages and Implementation Shortfall to evaluate the effectiveness of your trade execution strategies.
Predicting Market Impact
Understanding the market impact of your trades before they happen is a game-changer. TCA’s market impact models, developed using historical trade data, allow you to predict and minimize costs, optimizing your trade execution strategies.
Slippage Analysis: Pre and Post
Slippage can erode profits, but TCA helps you stay ahead of it. Pre-trade slippage analysis measures expected slippage by comparing planned trade prices with historical data. Post-trade, it analyzes deviations from benchmark prices, giving you the insights needed to improve future strategies.
These dimensions of TCA are designed to give you a comprehensive view of your trading landscape, allowing you to optimize strategies, reduce costs, and ultimately improve performance.
Leveraging Snowflake’s ASOF Join for Enhanced Analytics
MAMBA leverages Snowflake’s ASOF (As-Of) Join capability to complement these advanced analytics. ASOF Join is a powerful tool for managing time series data. It simplifies the process of linking datasets with non-matching timestamps, making it easier to extract meaningful insights.
Why ASOF Join is a Game-Changer
- Aligning Time Series Data: With ASOF Join, you can easily match records from different datasets based on the closest timestamp, reducing complexity and improving query performance.
- A Financial Use Case: For example, you can seamlessly link historical stock trade data with corresponding quote data, ensuring all relevant factors are considered in trade execution analysis. (The AsOf join provides a mechanism to perform the closest match on timestamps and allows one to continue using other criteria.
Without ASOF Join, achieving this level of precision would require complex and cumbersome queries. Now, with a simple and efficient syntax, you can enhance the speed and accuracy of your time series data analysis.
Looking Ahead: What’s on the Horizon? Advanced Research Analytics with Cortex
As MAMBA continues to evolve, we’re laying the groundwork for an exciting new feature, Advanced Research Analytics with Cortex, ‘Research Live’. This initiative promises to transform how financial research is conducted within MAMBA by leveraging AI-driven tools to automate data gathering, enhance analysis, and foster seamless collaboration across teams.
Research Live could become a powerful resource for analysts, providing a unified platform to access real-time financial data, analyze critical documents, and stay on top of market trends. With Cortex’s AI capabilities, analysts would generate comprehensive research notes and assign ratings with greater speed and accuracy, all while collaborating more effectively with their peers. Be on the lookout for follow-up articles as we continue to augment MAMBA with Cortex capabilities and functions.
Ready to refine your wealth and asset management strategy with MAMBA’s powerful and agile transaction cost analytics capabilities? Talk to one of our experts today.
