People In The Trade: Artur Fischer
Published on May 7, 2008.
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As the number of trading venues in Europe increases, pressure is mounting on the incumbent exchanges and multilateral trading facilities (MTFs) alike to offer features and tools that distinguish them from their rivals and attract clients. Artur Fischer, joint CEO of Börse Berlin Equiduct Trading, talks to theTRADEnews.com about his firm’s bid to set itself apart – its volume-weighted best bid and offer (VBBO) benchmark.
The idea behind VBBO is to gather market data from Europe’s main execution venues to determine the best overall price. “At the moment, we import real-time data from four exchanges – Euronext, Chi-X, Xetra and LSE,” explains Fischer. “If you combine these order books, then you can calculate the best possible price. By combining the different volumes of the different limits, you can achieve a better price all round.” The VBBO benchmark will also incorporate prices listed on Turquoise and Nasdaq OMX when they enter the market.
The main benefit of this new benchmark, Fischer believes, is that there is only one transaction fee for executing across different venues. He argues that a smart order router, on the other hand, would charge clients execution costs for each separate venue.
Through an analysis of the 309 instruments listed on VBBO, Börse Berlin found that in 75% of all trades, the VBBO price was better than any of the other best bid and offer (BBO) prices. The remaining 25% were as good as BBO prices. By giving clients two separate prices, for standard and retail market sizes (SMS, RMS), Fischer thinks that VBBO will finally offer the European consolidated tape many have been waiting for.
Fischer argues that without volume information, other benchmarks, such as European best-bid and offer (EBBO), are irrelevant. “If you want to buy a house and are trying to understand the pricing, it is meaningless if someone says to you the cost is £500,000 in London compared to £200,000 in Birmingham, because you don’t know how many bedrooms the house has and the exact location,” he says. “The same is true when you look at buying equities. If you don’t know the volume limits it is meaningless and this becomes even more significant on a European level.”
Fischer believes that VBBO and Börse Berlin Equiduct Trading will fit well into Europe’s competitive equity-trading landscape. “Others will compete by their own means, which is through transaction costs and getting a better price. That’s good for us because we give you the best across all four venues,” he comments. “I don’t want to call VBBO a clever trick; it’s simply a mathematical or scientific approach, which gives you the best possible price.”
