FRAMINGHAM, MA – March 1, 2011 – FX Transparency (“FXT”), an independent provider of FX transaction-cost analysis (FX TCA) and currency-execution consulting, today released a ground-breaking study of trading costs related to standing-instruction (or commonly “non-negotiated”) FX trades.
The data show a large reduction in costs in 2010 for those investors who allowed their custodian to execute currency trades on a standing-instruction basis. Overall costs dropped to 11 basis points in 2010 from an average of 30 basis points in years 2000 – 2009, which represent a reduction of 63%.
“The key question for investors is: Is this a permanent, positive change in the execution quality of these types of FX trades, or just a knee-jerk reaction to the legal events that began in the fall of 2009?” said James McGeehan, FX Transparency’s CEO. “To answer that question, investors should consistently monitor these costs moving forward. These costs are still three to four times higher than they are for negotiated trades.”
All costs were calculated against the interval time average price (ITAP), FXT’s proprietary proxy for volume weighted average price (VWAP), which is a commonly used measure in the equity trading space.
FXT made the complete study available to its clients on February 28.