Smart order routing

MiFID increases European price improvement opportunities - Instinet

The Markets in Financial Instruments Directive (MiFID) has not caused any “evident deterioration” in trade execution performance in Europe’s equity markets, according to a best execution policy review conducted by agency brokerage Instinet Europe.

Despite widespread industry concerns over liquidity fragmentation, smart-order routing technology has enabled Instinet clients to “exploit significant pricing opportunities”, said Richard Balarkas, CEO, Instinet Europe, commenting on the review of the firm’s

trading performance from the introduction on MiFID on November 1 2007 to 30 April 2008.

The review asserted that Instinet Europe’s SmartRouter routing tool was able to deliver an average price improvement of 3.08 bps by routing orders between rival trading venues during the six months measured.

Of the shares traded away from the primary markets on alternative trading venues, Instinet Europe's clients received price improvements of up to 50.1 percent of the time (by value traded) and executed at the same price or better 94.2 percent of the time.

"Many sceptics suggested that liquidity fragmentation would worsen execution performance. From our review, the introduction of competition in the European stock exchange space has not resulted in any evident deterioration in liquidity opportunities, price formation or execution performance. In fact, by using innovative smart-routing technology, we have been able to exploit significant pricing opportunities on behalf of our clients," said Balarkas.

Instinet Europe connects to NYFIX Euro Millennium, the only new multilateral trading facility to launch during the period of the review and expects to link to Turquoise, BATS Europe, NASDAQ OMX and NYSE Euronext's SmartPool, as well as systematic internalisers, in due course.