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Competition Heats Up Among Euro ATSs
Aug 15, 2008 @ 01:07 PM By Cristina McEachern,Electronic trading is heating up in Europe this summer as Turquoise officially went live with trading in 10 initial stocks and Chi-X Europe’s market share in FTSE 100 stocks climbed to 20 percent.
Chi-X may have the head start in the ATS race, but several new ATS are lining up and readying for launch this year and into next year.
Competition is only going to increase with Bats Trading, Equiduct and the Nasdaq OMX Europe platform being the next in line to launch in Europe.
As more ATSs enter the market and competition ramps up, the London Stock Exchange has said it will cut trading fees and has plans for liquidity provider incentives to garner more algorithmic trading flow.
Equiduct, the Borse Berlin ATS, announced it was moving to a maker/taker model in an effort to reward liquidity providers as it prepares for an upcoming platform launch.
Liquidity is the name of the game for these ATSs and whether or not they can build momentum will be based on not only their pricing structure, but many are also looking to their backers to get things moving in the right direction.
As more ATSs enter the market and trading off-exchange continues to grow in Europe, time and volume will tell which will be successful and what impact that will have on the traditional exchange model.
In an effort to track electronic trading across the growing number of venues, Xtrakter, a fixed income market utility, has begun to track liquidity in the European markets.
Below are the results for transactions processed by Xtrakter during the month of June for equities and fixed income. According to Xtrakter, the results do not include data relating to systematic internalisers (SIs) or data for trades conducted on the LSE stock exchange trading system (SETS).
Equities (over the counter 20.75%)
1. Euronext Paris – 17.87%
2. Chi-X Europe - 9.41%
3. Deusche Kassenverein - 8.99%
4. London Stock Exchange – 7.05%
5. Electronic Share Market – 6.83%
6. Deutsche Borse – 6.14%
7. NYSE Euronext Amsterdam – 6.06%
8. Nasdaq (USA) – 3.35%
9. Virt-X – 2.91%
10. Other venues – 10.64%
Fixed Income (over the counter – 88.3%)
1. Tradeweb (Europe) – 1.8%
2. MTS SPA – 1.66%
3. ICAP Electronic (Europe) – 1.64%
4. Bondvision – 0.66%
5. Euro Global MTS – 0.6%
6. NYSE Euronext (Amsterdam) – 0.59%
7. London Stock Exchange – 0.53%
8. ICAP Electronic (USA) – 0.46%
9. Euro MTS – 0.43%
10. Other venues – 2.40%
A New Era of Change at the NYSE
May 30, 2008 @ 10:15 AM By Cristina McEachern,Larry Leibowitz, executive vice president, head of U.S. markets and global technology at NYSE Euronext Group, was a refreshing keynote at this year’s TowerGroup Financial Services Business & Technology Conference in Boston.
Continue reading ...Five Keys to Running a Successful Global ATS
May 20, 2008 @ 11:45 AM By Cristina McEachern,Recently I sat down with Instinet’s Co-CEOs Fumiki Kondo and Anthony Abenante to get an update on their first year on the job and what Instinet has coming down the pipeline.
But I was also interested in finding out their vision for the global ATS or MTF market. With the success of Instinet subsidiary Chi-X Europe and the expansion into other global markets—Chi-X Canada and Chi-X ATS Australia already announced—we wanted to know their thoughts on what it takes to successfully build and run a global trading platform.
The consensus puts the European market about seven years behind the U.S. space so ATS are beginning to gather steam and attract trading flow in post-MiFID Europe. For the first quarter of 2008 Chi-X Europe reported over 6.6 million trades and saw peak market volume climb to over 13 percent of total trading in FTSE 100 stocks on March 13, 2008.
As other ATS prepare to launch in Europe and beyond, Kondo and Abenante share their five keys to running a successful global ATS.
Instinet Co-CEOs Anthony Abenante (left) and Fumiki Kondo (right)
Photo by Stephen Aviano
#1 Add Value
Attracting order flow by adding value is also key, according to Abenante. “At the end of the day we’re bringing together people who hopefully will find an opportunity to trade stocks,” he says. “This is a market structure business, the way you add value is making markets more efficient. Whether that’s being faster, or smarter or cheaper—all of those are important. “
He adds that making Chi-X Europe's back end technology cheaper, relying on partner Fortis was a good way to add value for the end user ultimately. “Fortis provides our back end solution, which is about 70 percent cheaper than the incumbent solution. That should generate more volume as costs come down and markets become more efficient it should bring in more trading. At the end of the day more stock you trade within the spread, the spread tightens and that’s good for markets,” notes Abenante.
#2 Provide a Consistent Experience
The success of an ATS is in large part due to the technology and therefore speed and cost, but Abenante also points to the customer experience as an important factor. “Providing a consistent experience for clients from an API standpoint globally—how they interface to the exchange should be consistent and the same types or order controls should be there,” he says. “It’s also important to minimize the burden on people to interface with you and make it as easy as possible for them to come in.”
#3 Know the Market
Anyone who has tried to enter a new market is all too familiar with the advantage having a local presence affords. “We’ve been on the ground in Europe since the 80s and in Asia since the 90s. We have relationships with the regulators and know what they’re looking for and we know the process,” says Abenante.
He also says that bringing in outside investors often helps further this local knowledge and helps enter new foreign markets. “It’s not just brining in trading flow and capital, it’s the intellectual capital, the knowledge of the regulators and how these markets exist,” explains Abenante. “That gives more of the color and helps us figure out how to navigate in these markets. It’s tough walking in to a country and saying ‘we want to be an alternative to the national exchange,’ you really have to tread lightly.”
#4 Make it Transparent
Obviously transparency is something all clients are looking for in their trading destinations and something ATS should keep in mind. “We definitely bring a general philosophy of openness. If you’re trying to sell a more efficient market, to not be transparent is a bit hypocritical,” says Abenante.
Kondo adds, “It’s important that everyone can come and play openly.”
#5 Emphasize Uniqueness
Kondo says that Instinet’s agency model is one way the firm differentiates its ATS offerings. “We don’t have any proprietary flow for example in our ATS’, its all natural flow,” he explains. “That’s one key of ours to differentiate the ATS – the agency model.”
Derivatives Exchanges On a Tear
May 5, 2008 @ 12:26 PM By Cristina McEachern,As equities exchanges face growing fragmentation and competition from alternative trading venues, the derivatives exchanges are seeing trading volumes jump as electronic trading permeates into these markets.
For the first quarter of 2008, many of the derivatives exchanges reported significant profit growth and volume increases as volatility hit the markets and risk management continues to be at the forefront.
The Intercontinental Exchange (ICE) reported net profit of $92.3 million with its futures exchanges seeing an increase of 39% in profit over the previous year. The ISE futures exchanges saw 62.5 million in contracts traded in the first quarter.
NYMEX also credited exponential growth in electronic trading for driving its profits for the quarter. NYMEX saw net profits reach $72.1 million, almost 30 percent more than the same period last year thanks for average daily volumes reaching 1.9 million contracts.
On the options front, big jumps were also evident as volatility continued to plague the markets. The International Securities Exchange (ISE) saw its average daily volume for options hit 4 million contracts for the month of April, almost 50 percent growth over the same period last year.
At the CBOE Futures Exchange, volume reached over 100,000 contracts traded for the month of April, up almost 150% over the same time last year.
The CME Group saw options volumes increase 16 percent to 1.8 million contracts per day as electronic options trading grew 23 percent, reaching an average of 275,000 contracts per day.
NYSE Arca Options saw daily volumes grow 36% in April. While derivatives trading at NYSE Euronext's Liffe saw a 34% increase in contracts traded so far this year compared to the same period last year. During April, more than 97 million futures and options contracts were traded, up 33 percent over the previous year.
At Advanced Trading we’re covering electronic trading in the derivatives markets more and more and this month we are seeking out providers of Futures Algorithms for our next Directory. If you offer algorithms for futures please be sure to fill out the online form at:
http://advancedtrading.com/directories/futures-algorithms/entry/
Continue reading ...ISE Teams with Eurex to Develop New Options Trading System, Replacing OMX by 2011
Jan 30, 2008 @ 01:45 PM By Ivy Schmerken,The International Securities Exchange (ISE) and Eurex, the derivatives marketplace owned by Deutsche Borse, will jointly develop a new options trading system for the ISE that will replace the OMX Click trading system currently in operation. This step is the first initiative following the completion of the $2.8 billion merger of ISE and Eurex on Dec. 19, 2007.
Continue reading ...Turquoise Update
Jan 23, 2008 @ 11:06 AM By Cristina McEachern,Despite recent delays to its planned launch, Project Turquoise, the multilateral Pan European trading facility established by a consortium of banks, is on its way to a 2008 launch with its CEO and CTO in place and two new partners.
Continue reading ...NYSE Euronext Buys Amex to Snare Options Jewel
Jan 18, 2008 @ 02:36 PM By Ivy Schmerken,NYSE Euronext is on a shopping spree to consolidate the global exchange landscape and last night it agreed to acquire the American Stock Exchange for $260 million in its own common stock, to boost its options business and multi-asset class product range.
Continue reading ...Consortium Buys into Chi-X Europe
Jan 10, 2008 @ 12:52 PM By Cristina McEachern,Instinet announced a consortium of 13 banks and trading firms have taken a minority equity stake in its Chi-X Europe multilateral trading facility (MTF).
Continue reading ...NYSE MatchPoint Set for Launch
Jan 7, 2008 @ 11:24 AM By Cristina McEachern,The U.S. Securities and Exchange Commission has approved the rules for NYSE Euronext’s MatchPoint crossing network. MatchPoint is expected to officially begin trading on January 22, 2008.
Continue reading ...Clarifying TSX's Electronic Market Share and Alpha Trading Systems
Dec 12, 2007 @ 05:35 PM By Ivy Schmerken,In yesterday's story about the TSX Group merging with Montreal Exchagne (MX), I said TSX had 90 percent market share in equities and suggested that Alpha Group was building a block trading system. Jackie Chung, president of Competitive Metrics, sent me an email this afternoon clarifying the TSX market share figures and explaining the strategy behind Alpha Group (now known as Alpha Trading Systems).
Continue reading ...How Will the TSX/ Montreal Merger Affect Spreads?
Dec 12, 2007 @ 11:08 AM By Kerry Massaro,CFA and an Advanced Trading reader, Bud Haslett of Miller Tabak & Co., emailed me the following commentary. I'd like to ask our readers the question he asked me: Do you think the
merger will result in narrower spreads and increased option volume for the combined organization?
Below is Bud's commentary:
Continue reading ...TSX Group to Merge with Montreal Exchange to Create Multi-Asset Trading Venue
Dec 10, 2007 @ 10:41 PM By Ivy Schmerken,The TSX Group has agreed to merge with the Montreal Exchange Inc. (MX) in a C$1.3 billion deal that will create an integrated, multi-asset class execution venue for equities and derivatives in Canada.
Continue reading ...Commentary: Nasdaq PHLX Acquisition
Nov 7, 2007 @ 02:18 PM By Cristina McEachern,As Brad Bailey, senior analyst at Aite Group, puts it, “where there’s smoke, there’s fire.” And of course to exchange consolidation watchers it’s no big surprise then that Nasdaq announced its acquisition of the Philadelphia Stock Exchange for $652 million.
Continue reading ...BATS Trading Seeks Exchange Status in SEC Filing
Nov 6, 2007 @ 11:48 AM By Ivy Schmerken,BATS Trading, the alternative equity marketplace, moved to become a fully licensed securities exchange, filing an application with the U.S. Securities and Exchange Commission yesterday.
Continue reading ...Fidessa Launches Canadian Smart Routing
Oct 30, 2007 @ 11:39 AM By Cristina McEachern,Fidessa has launched a new Smart Routing Service for the Toronto Stock Exchange and Pure Trading, the first Canadian alternative market.
Continue reading ...NeoNet Connects to Chi-X
Oct 23, 2007 @ 11:59 AM By Cristina McEachern,NeoNet, a global DMA agency broker, announced it has connected to Chi-X, its first link to a European alternative trading system (ATS).
Continue reading ...SEC Director Sirri on Exchange Pressures
Oct 8, 2007 @ 11:18 AM By Cristina McEachern,As exchanges are coming under more and more pressure from alternative execution venues and trade volumes decline, regulators are keeping a watchful eye.
Continue reading ...Analysts Weigh in on Nasdaq-BSE Acquisition
Oct 5, 2007 @ 04:14 PM By Ivy Schmerken,Analysts are weighing in with their opinions on Nasdaq's acquisition of the Boston Stock Exchange for about $61 million, announced earlier this week. While many of us were still digesting Nasdaq's transactions with Sweden's OMX AB, Borse Dubai as well as the unwinding of its position in the London Stock Exchange, Nasdaq announced a second deal on the domestic front.
Continue reading ...Nasdaq to Acquire Boston Stock Exchange
Oct 2, 2007 @ 10:46 AM By Ivy Schmerken,As predicted, the global consolidation of exchanges is accelerating and the trend is taking out a storied member of the national market system (NMS). This morning, the Boston Stock Exchange (BSE) said The Nasdaq Stock Market would acquire it in a transaction worth $61 million. The agreement is subject to approval by the BSE members and the Securities and Exchange Commission.
Continue reading ...More Speculation on Nasdaq-Dubai Alliance
Sep 25, 2007 @ 10:43 AM By Ivy Schmerken,There could be more intrigue behind Nasdaq’s three-way transaction with the Borse Dubai to control OMX and dispose of its stake in the London Stock Exchange. One leading UK newspaper reported that Nasdaq has plotted an alliance with Dubai to ultimately bring the LSE into a global exchange network.
Continue reading ...Commentary: Project Turquoise Delay
Aug 8, 2007 @ 03:16 PM By Cristina McEachern,Reports are swirling that Project Turquoise, the bank consortium-backed European equities trading platform, will now launch sometime in the second quarter of 2008.
Continue reading ...Has NYSE's Electronic Trading Model Caused More Volatility?
Aug 2, 2007 @ 05:33 PM By An Industry Executive,
Contributed by Joseph Saluzzi, Partner and Co-Founder of Themis Trading, an agency only institutional brokerage firm.
TowerGroup Update: Impact of Exchange Activities
May 31, 2007 @ 06:04 PM By Cristina McEachern,The continued consolidation and globalization drive among exchanges will have “medium to high impact” on securities institutions, according to Dushyant Shahrawat, research director for TowerGroup's Security & Capital Markets service.
Continue reading ...The Latest from BATS' Dave Cummings
May 25, 2007 @ 08:48 AM By Kerry Massaro,Here is the latest of the notorious emails from Dave Cummings, CEO, of BATS Trading. Looks like BATS won't be doing any deals with the regional exchanges, its working on exchange status and the market center has gained some "inspriation" from Nasdaq. Check it out:
Dear Trading Community,
"The Deal'n is Now Done"
BATS is happy to announce we have closed our funding round and raised an additional $45 million from new and existing investors. The new investor will be announced shortly in a separate press release.
We also have decided to stop talking about mergers with the regionals and remain independent.
Will Geyer New President and COO at JonesTrading
May 2, 2007 @ 12:05 PM By Cristina McEachern,Will Geyer joins JonesTrading as the agency brokerage's new president and COO. The appointment comes on the heels of a $50 million equity financing investment from Friedman Fleischer & Lowe.
Continue reading ...Eurex Bets Big on Options Growth with ISE Merger
May 2, 2007 @ 12:01 PM By Cristina McEachern,Counting on continued growth in the options market, Eurex set to acquire the ISE in $2.8 billion deal
Continue reading ...NYSE Preps for Monday Launch of NYSE Bonds
Apr 17, 2007 @ 07:12 PM By Kerry Massaro,The NYSE is preparing to launch NYSE Bonds, a trade-matching platform created to emulate trading on an equities exchange rather than the request-for-quote model familiar to the fixed-income market. John Holman, VP of Fixed Income, NYSE Group, notes that the initial focus is corporate bonds, but he is considering expanding the system to include Treasuries, munis, credit default swaps and convertible securities down the road.
Continue reading ...TradeTech Recap: An Equities Vision
Mar 8, 2007 @ 12:09 PM By Cristina McEachern,From transaction cost analysis (TCA) to algorithmic trading, dark pools and Reg NMS, this week’s TradeTech USA Equity Trading Summit in New York City was a barometer of change in the buy side world. And with Reg NMS going into effect for exchanges this past Monday it was obviously the talk of the conference.
Continue reading ...Nasdaq is Beginning to Consider a Future Without the London Stock Exchange
Feb 26, 2007 @ 02:42 PM By An Industry Executive,
Contributed by Celent Analysts David Easthope and Cubillas Ding
Nasdaq's pursuit of the LSE has received tremendous market and press coverage of late. However, the potential tie-up seemed to turn a strategic corner recently. The revelation, detailed below, that Nasdaq met with the Project Turquoise consortium a few weeks ago to potentially license the INET technology from its ECN platform takes Nasdaq's hostile pursuit of the London Stock Exchange (LSE) to another level. Whereas in the past the Nasdaq/LSE disagreement seemed to be over a fair price for the LSE franchise, Nasdaq has now raised the stakes by making the key issue the future competitive position of the LSE across the whole of Europe.
Continue reading ...NEW DATES FOR REG NMS COMPLIANCE
Jan 26, 2007 @ 10:55 AM By Kerry Massaro,The SEC has postponed the Trading Phase date of Regulation NMS, as well as two other deadlines for the Order Protection and Access Rules.
Continue reading ...NASD/NYSE Regulatory Consolidation Approved
Jan 22, 2007 @ 04:30 PM By Kerry Massaro,As expected the NASD members approved the regulatory consolidation of the NASD and NYSE. The vote took place on Friday. I'm sure the industry across the board is celebrating the decision as this move is expected to reduce the regulatory and financial burden of all member firms.
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