A lot of energy has been put into finding novel data sets that might give investors an edge. But an area that is sometimes overlooked is the use of asset managers’ own data sets, to reduce trading costs. This has become a source of alpha for some firms.
There have been significant recent advances in the sophistication of data analysis techniques, and when used to analyse trading data in a systematic, scientific way, they often identify substantial cost saving opportunities. If an asset manager is not collecting all of its trading and execution data across all asset classes, it is doing itself a huge disservice. Every time a request-for-quote is submitted to a dealer, and a piece of data comes back that isn’t recorded, the firm has lost valuable information.
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