Smart order routing

UPDATE: Trading on LSE now cheaper via Nasdaq OMX Europe

Nasdaq OMX Europe, the exchange backed multilateral trading facility (MTF), has said it will not pass on to clients the onward routing charge imposed by the London Stock Exchange (LSE).

The LSE announced a revised pricing structure yesterday, which included a one-basis-point charge for orders routed to it via other displayed markets. In addition, MTF routed orders will not qualify for the value-based discounts that apply to brokers’ orders from other sources.

Nasdaq OMX Europe is the only MTF with onward routing at present, having teamed up with Citi to provide the service on its behalf. The charge for routing orders to the LSE is 0.25bps.

“We are not passing on the LSE charge to our members,” confirmed a Nasdaq OMX Europe spokesman. “The 0.25bps all-inclusive pricing promotion is on as planned as we will continue to offer fast and cost-efficient trading in European blue chips.”

As a result, trading on the LSE will be cheaper through Nasdaq OMX Europe rather than directly on the exchange itself. "The least expensive way to trade aggressively on the LSE – i.e. for removing liquidity – is via Nasdaq OMX Europe during our current price promotion,” Todd Golub, head of markets development, Nasdaq OMX Europe, told theTRADEnews.com.

The cheapest charge for an aggressive execution on the LSE is 0.45 basis points, but a firm would need to be trading more than £30 billion a month on the exchange to qualify for this. Those trading £7.5 billion or less on the LSE pay 0.75 basis points for an aggressive execution.

The LSE has denied that the tariff is anti-competitive. “It is fair and right to distinguish between client business and our competitors,” LSE spokesperson John Wallace told theTRADEnews.com, when the plans were first revealed. “Nasdaq OMX Europe remains free to compete with us in equity trading, as others are doing.”