Investment Operations

Electronic/Algo Trading and TCA

Course Instructor

Course Level

Intermediate

Certification

Certificate

Delivery

Via Zoom

Hours (EST)

10:00 am​ - 5:00 pm

Description

*This course can also be offered upon request and can be customized to fit your team’s needs.

Date TBD

Prerequisite: None

Agenda – Day 1

The Electronic and Algorithmic Trading part of the course is specifically designed to equip aspiring traders, financial analysts, and industry professionals with the skills and knowledge necessary to leverage the vast potential of computerized (electronic) trading in modern financial markets. By enrolling in this course, you’ll gain a deeper understanding of the fundamentals of electronic trading systems, including their evolution in the context of trading markets in general, and their impact on important sources of risk and costs in trading. You’ll also gain exposure to algorithmic trading strategies, which will help you understand ways to reduce risks and the costs of trading financial instruments. Our expert instructor will guide you through hands-on exercises, simulations, case studies, and practical applications to ensure you have a solid grasp of this emerging and rapidly developing field. The goal is to:

  • Explain the key features and history of general trading markets
  • Describe the evolution and general goals of electronic and algorithmic trading
  • Review all sources of trading costs
  • Understand market impact and what causes it
  • Define and explore common trading algorithms and how they help reduce trading costs

Electronic & Algorithmic Trading

  1. Overview of electronic trading markets
  2. Brief history of general trading markets
  3. Order handling scenarios (“high-touch” vs. “low-touch”)

Understanding Costs of Trading (Implicit and Explicit)

  1. Market impact: temporary vs. permanent
  2. Information Asymmetry and Adverse Selection relative to “informed order flow”
  3. Efficient Frontier of trade execution

Basics of Algorithmic Trading

  1. Key terms and definitions
  2. VWAP Algorithm
  3. POV Algorithm
  4. TWAP Algorithm
  5. IS Algorithm
  6. Other Algorithms
  7. Strengths and Weaknesses

Agenda – Day 2

Transaction Cost Analysis (TCA) is the rigorous quantitative study of the financial cost of transacting in securities markets. TCA can be applied post-trade, for individual trades or groups of trades, and can be analyzed pre-trade, based on historical data and complex mathematical frameworks to predict the expected cost of transacting as well as the variability of that cost. In modern trading markets, substantial pricing and volume data allow investors and traders to assess how costly historical transactions have been, how effective trading operations have been at achieving investment and trading objectives, and what strategies can be adopted to better achieve these objectives going forward.

The objective for TCA part of the course is to:

  • Describe the goals of algorithmic trading and transaction cost analysis
  • Evaluate and critique different methods and metrics for computing TCA
  • Discuss the difference between pre-trade and post-trade analysis
  • Understand what factors contribute to optimal trading for cost minimization
  • Explore relevant considerations for TCA in different asset classes
  • Review sample TCA reports and identify key takeaways

Transaction Cost Analysis Overview

  1. Definition, decomposition, and purpose
  2. Illustration: Anatomy of the Life of a Trade
    • Delay Cost
    • Bid-Ask Spread Cost
    • Temporary Impact
    • Permanent Impact
    • Opportunity Cost
  3. Pre-Trade vs. Post-Trade TCA

Different Cost Metrics

  1. Cost relative to VWAP (volume-weighted average price)
  2. Gold Standard: IS (implementation shortfall)

Factors that Affect Optimal Performance

  1. Size/Volume
  2. Liquidity
  3. Volatility
  4. Informed vs. Uninformed Trading
  5. Aggressive vs. Passive Trading Strategies

TCA by Asset Class

  1. Pre-Trade vs. Post-Trade Modeling
  2. Which factors are most important for driving TCA metrics in different asset classes?

TCA in Action

  1. Calculating TCA on Example Trades
  2. Example TCA Reports

Summary & Questions

$1,495.00

In-House Training

Custom Training can help you achieve your corporate training goals while staying on budget and focusing the content on the needs of your group. Email your questions regarding corporate training to training@investmentoperations.net.

2024 Training Calendar

Training Catalogue

Course Instructor

Course Level

Intermediate

Certification

Certificate

Delivery

Via Zoom

Hours (EST)

10:00 am​ - 5:00 pm

$1,495.00

Description

*This course can also be offered upon request and can be customized to fit your team’s needs.

Date TBD

Prerequisite: None

Agenda – Day 1

The Electronic and Algorithmic Trading part of the course is specifically designed to equip aspiring traders, financial analysts, and industry professionals with the skills and knowledge necessary to leverage the vast potential of computerized (electronic) trading in modern financial markets. By enrolling in this course, you’ll gain a deeper understanding of the fundamentals of electronic trading systems, including their evolution in the context of trading markets in general, and their impact on important sources of risk and costs in trading. You’ll also gain exposure to algorithmic trading strategies, which will help you understand ways to reduce risks and the costs of trading financial instruments. Our expert instructor will guide you through hands-on exercises, simulations, case studies, and practical applications to ensure you have a solid grasp of this emerging and rapidly developing field. The goal is to:

  • Explain the key features and history of general trading markets
  • Describe the evolution and general goals of electronic and algorithmic trading
  • Review all sources of trading costs
  • Understand market impact and what causes it
  • Define and explore common trading algorithms and how they help reduce trading costs

Electronic & Algorithmic Trading

  1. Overview of electronic trading markets
  2. Brief history of general trading markets
  3. Order handling scenarios (“high-touch” vs. “low-touch”)

Understanding Costs of Trading (Implicit and Explicit)

  1. Market impact: temporary vs. permanent
  2. Information Asymmetry and Adverse Selection relative to “informed order flow”
  3. Efficient Frontier of trade execution

Basics of Algorithmic Trading

  1. Key terms and definitions
  2. VWAP Algorithm
  3. POV Algorithm
  4. TWAP Algorithm
  5. IS Algorithm
  6. Other Algorithms
  7. Strengths and Weaknesses

Agenda – Day 2

Transaction Cost Analysis (TCA) is the rigorous quantitative study of the financial cost of transacting in securities markets. TCA can be applied post-trade, for individual trades or groups of trades, and can be analyzed pre-trade, based on historical data and complex mathematical frameworks to predict the expected cost of transacting as well as the variability of that cost. In modern trading markets, substantial pricing and volume data allow investors and traders to assess how costly historical transactions have been, how effective trading operations have been at achieving investment and trading objectives, and what strategies can be adopted to better achieve these objectives going forward.

The objective for TCA part of the course is to:

  • Describe the goals of algorithmic trading and transaction cost analysis
  • Evaluate and critique different methods and metrics for computing TCA
  • Discuss the difference between pre-trade and post-trade analysis
  • Understand what factors contribute to optimal trading for cost minimization
  • Explore relevant considerations for TCA in different asset classes
  • Review sample TCA reports and identify key takeaways

Transaction Cost Analysis Overview

  1. Definition, decomposition, and purpose
  2. Illustration: Anatomy of the Life of a Trade
    • Delay Cost
    • Bid-Ask Spread Cost
    • Temporary Impact
    • Permanent Impact
    • Opportunity Cost
  3. Pre-Trade vs. Post-Trade TCA

Different Cost Metrics

  1. Cost relative to VWAP (volume-weighted average price)
  2. Gold Standard: IS (implementation shortfall)

Factors that Affect Optimal Performance

  1. Size/Volume
  2. Liquidity
  3. Volatility
  4. Informed vs. Uninformed Trading
  5. Aggressive vs. Passive Trading Strategies

TCA by Asset Class

  1. Pre-Trade vs. Post-Trade Modeling
  2. Which factors are most important for driving TCA metrics in different asset classes?

TCA in Action

  1. Calculating TCA on Example Trades
  2. Example TCA Reports

Summary & Questions

In-House Training

Custom Training can help you achieve your corporate training goals while staying on budget and focusing the content on the needs of your group. Email your questions regarding corporate training to training@investmentoperations.net.

2024 Training Calendar

Training Catalogue

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