Congestion in the transmission lines is one of the technical problems that appear particularly in the deregulated environment. One of the congestion management methodologies is installing Thyristor Controlled Series Compensator (TCSC) devices into the system. The major objective in applying TCSC is to increase power transfer capacity in critical tie-lines under contingency conditions. Under normal steady state conditions, it can be used to damp Sub-Synchronous Resonance by converting a part of the fixed compensation to controllable series compensation. In this paper, a novel method using Particle Swarm Optimization (PSO) algorithm is proposed to determine the optimal allocation of TCSC devices for maximizing the Available Transfer Capability (ATC) of power transactions between source and sink areas in the deregulated power system. The algorithm simultaneously searches the location, size and cost of TCSC devices. ATC is calculated using AC Power Transfer Distribution Factors (ACPTDF). The effectiveness of the proposed method is demonstrated using a modified IEEE 30 bus test system in normal and contingency conditions for the selected bilateral, multilateral and area wise transactions. The simulation results show that the introduction of TCSC devices in a right location could enhance ATC, reduced total losses and improve the line congestion as compared to that of the system without TCSC devices.