A lot of people think of transaction cost analysis as a tool to gauge the execution quality of trades and thus answer a lot of Reg NMS questions. But the software is rapidly improving.

Celent notes that the software is now more functional and can actually "adapt" strategies at the point of trade, essentially allowing buy-side firms to switch strategies at the last possible millisecond to get a better execution, reports Advanced Trading.

Vendors such as ITG, Abel Noser, Ancerno, QSG are said by Celent to be actively involved in the market. Rosenblatt Securities and Pipeline Trading are also active, providing tools to monitor performance during the execution phase.

One leading-edge approach allows traders to input new parameters to automate the process by which execution strategies are changed in near-real time. All of this is significant in an algorithm-driven market.

A 2009 Pipeline Trading/AllianceBernstein study of algorithm switching, in which the control of parameter settings and algorithm selection are automated based on market conditions, found that a predictive switching strategy can outperform an optimal algorithm by 30 percent, notes Celent.

For more:
- here's an item via Advanced Trading

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