Generating Business Value for Brokers Via BI
InetSoft helps generate more
revenues, obtain better customer service and achieve higher profit margins because it provides total
visibility into the business. It delivers tailored information in the quickest, most relevant manner possible
so each user has actionable information to meet their specific business objectives.
Mission critical information left untouched is meaningless. As mentioned earlier, InetSoft provides a
framework allowing users to define their business data in business terms, versus IT application or system
names. For instance, when brokers receive an order from a counterparty, they can name the process step Order
Received.
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An end user can now see the process step on the dashboard, represented in a familiar term instead
of an unrecognizable IT or system name. In addition, the Order received step is usually a farm of servers
that processes high volumes of incoming orders. With the correlation and aggregation capabilities of InetSoft,
all orders come together as a single item on the dashboard.
The InetSoft technology also helps you manage the business, based on the definitions and measurements of Key
Performance Indicators (KPIs). When you define these KPIs, you can set performance thresholds based on the
business strategy for the trading day. When a threshold is crossed, real-time visual alerts signal
stakeholders to a potential problem or opportunity so users can take immediate action to affect that day's
performance.
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For example, if you build a metric called Hit Ratio, (number of accepted trades divided by the number of
requests for quotes) you could establish a KPI around an acceptable value to be maintained. The Data Mashup
Engine calculates the Hit Ratio throughout the trading day. The KPI itself can be seen on the dashboard and
can be customized as a line-graph, bar-graph, or pie-chart. The end user can receive alerts on the dashboard,
in an email, as a pop-up message in the workstation system tray (like an Outlook incoming email message), or
any combination of these. Based on the alert, the user then decides the correct action. He might widen his
pricing spreads if the ratio is too high (gaining a better pricing margin) or he might tighten his pricing
spreads if the ratio is too low (increasing acceptance volume).
InetSoft's flexibility also helps you determine root cause of problems in a number of ways. You could
drill into the KPI, view the underlying data making up the KPI and regroup and repurpose the data by geography
to determine if the problem is localized. You could also regroup the data by trading desk or by trader names
to determine if a particular trading desk or trader is not performing up to par.
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“Flexible product with great training and support. The product has been very useful for quickly creating dashboards and data views. Support and training has always been available to us and quick to respond.
- George R, Information Technology Specialist at Sonepar USA
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What KPIs and Metrics Are Tracked in Broker Execution Dashboards?
Broker execution dashboards, especially in the financial and trading industries, are used to track and monitor key performance indicators (KPIs) and metrics that help brokers and traders optimize their performance, manage risk, and meet regulatory requirements. These dashboards are crucial for gaining insight into how well trades are being executed, operational efficiency, and client satisfaction.
Here are the primary KPIs and metrics tracked in broker execution dashboards:
1. Execution Quality Metrics
- Fill Rate: Measures the percentage of orders that were successfully executed. A higher fill rate indicates effective order execution.
- Slippage: The difference between the expected price of a trade and the actual price at which the trade is executed. High slippage indicates inefficiencies and can impact profitability.
- Order-to-Fill Time: Tracks the time taken from order placement to execution. Faster times can lead to better pricing and more satisfied clients.
- Execution Price Deviation: This tracks how close the execution price is to the market price at the time the order is placed. A low deviation suggests better execution quality.
2. Latency and Speed Metrics
- Latency (Round-Trip Time): Measures the time taken for a signal to go from the trader's system to the market and back. Low latency is essential in high-frequency trading.
- Order Submission to Execution Time: This measures the time between when an order is submitted and when it's executed, giving insight into system performance.
- Network Latency: Tracks delays caused by network inefficiencies, helping optimize system performance for faster trading.
3. Order Flow and Volume Metrics
- Order Book Depth: Shows the number of buy and sell orders at various price levels. This metric helps traders understand market liquidity.
- Order Size Distribution: Breaks down the volume of trades by size, providing insight into whether smaller or larger trades dominate the market.
- Volume Weighted Average Price (VWAP): A benchmark that calculates the average price at which an order was executed, weighted by volume.
- Total Executed Volume: Total number of shares/contracts executed over a given time period, providing a sense of market participation and liquidity.
4. Profitability and Performance Metrics
- Realized and Unrealized P&L (Profit and Loss): These metrics track the profit or loss generated from trades that have been completed (realized) or are still open (unrealized).
- Commission and Fees: Tracks the fees brokers are paying to execute trades, a crucial metric for cost management and profitability analysis.
- Cost per Trade: The average cost incurred per trade, including all fees, commissions, and spreads. Lower costs per trade improve overall profitability.
5. Compliance and Risk Metrics
- Order Rejection Rate: Percentage of orders that were rejected by the market or broker. High rejection rates can indicate issues with compliance or order entry errors.
- Risk Exposure: Measures a broker's exposure to different types of risks, such as market, credit, or liquidity risks. It ensures that risk management protocols are in place.
- Stop-Loss and Limit Orders: The percentage of trades using stop-loss and limit orders, which indicates how well risk management strategies are being applied.
6. Client-Specific Metrics
- Client Satisfaction Score: A qualitative metric that may be gathered from client feedback and surveys, showing how satisfied clients are with the execution quality and service provided.
- Client Order Completion Time: Tracks the average time it takes to complete a client's order from placement to final execution.
- Order Type Breakdown: Percentage breakdown of the types of orders (e.g., market orders, limit orders, stop orders) used by clients. This helps brokers tailor services to client preferences.
7. Liquidity Provider and Venue Metrics
- Liquidity Provider Performance: Measures the quality of liquidity providers, assessing how often they provide liquidity for trades, the prices they offer, and their reliability.
- Venue Latency: Measures how fast trades are executed at different trading venues or exchanges. Venues with lower latency are preferred for better execution quality.
- Execution Venue Breakdown: Shows the distribution of executed trades across different venues or exchanges, which helps in identifying the most cost-efficient and reliable venues.
8. Market Conditions and Benchmarks
- Market Impact: Tracks the effect of a large order on the market price. Lower market impact is desired, as it indicates efficient execution without distorting the market.
- Spread: The difference between the bid and ask price. Narrower spreads typically indicate higher liquidity and lower transaction costs.
- Benchmark Comparison: Comparing the execution price to various benchmarks, such as the VWAP, time-weighted average price (TWAP), or market close price. This shows how the broker's performance stacks up against market averages.
9. Operational Efficiency
- Error Rate: Measures the percentage of trades that encounter issues, such as execution errors or incorrect orders. Minimizing errors improves operational efficiency.
- Automation Rate: Tracks the percentage of orders executed through automated systems versus manual intervention. Higher automation can lead to faster and more accurate execution.
- System Uptime: Measures the availability of the trading platform, with higher uptime reflecting more reliable operations.
10. Regulatory Compliance Metrics
- Reg NMS Compliance: For brokers in the U.S., this measures compliance with Regulation National Market System (NMS) to ensure that trades are executed at the best available price.
- Best Execution Compliance: Ensures that brokers meet their obligation to execute orders in the best interest of their clients, as required by various regulatory frameworks globally.
- MiFID II Compliance: For brokers in Europe, this tracks compliance with MiFID II regulations regarding trade transparency, reporting, and client protection.