Definition
Transaction cost analysis is the discipline of measuring execution quality against benchmarks, decomposing total execution cost into its components (spread cost, market impact, timing cost, venue fees, slippage versus arrival price), and using the resulting analytics to improve future execution decisions. TCA is both a compliance deliverable (supporting best-execution documentation) and an alpha-generation capability (informing routing policy, algorithm selection, and venue evaluation). Common benchmarks include arrival price (implementation shortfall), VWAP, and spread capture.
Example
After a week of TWAP-executed orders across five venues, a TCA report decomposes total cost by venue, algorithm, and time-of-day, revealing that one venue consistently delivers better fills during US hours while another outperforms during Asia hours. The routing policy is updated accordingly.
How Liquid Mercury Handles This
Mercury Pro treats TCA as a first-class output rather than an export-on-request surface, with per-venue and per-algorithm attribution feeding back into routing policy and best-execution documentation.