Fixed Income Year End Trading Cost Review
1/30/25 TabbFORUM
BondWave first began measuring trading costs in 2016 for US Corporate and Municipal bonds. BondWave records a fair market value for every trade disseminated by FINRA’s Trace, and MSRB’s EMMA services, using the prevailing market price (PMP) waterfall methodology codified in FINRA Rule 2121 and MSRB Rule G-30. To date that data set compromises over 1 billion observations. With this PMP data set BondWave measures total trading cost by comparing executed prices to their PMP-derived fair values. For principal trades the difference between the execution price and the PMP represents the total trade cost. For riskless principal trades another element needs to be added to measure total cost, specifically slippage. Using these metrics, BondWave produces a total cost measurement for every trade. open website
