Exchange group NYSE Euronext will face more competitive pressure in Europe from next month when BATS Europe, the European trading platform backed by US exchange BATS, introduces ‘inverted’ pricing for stock in three Euronext indices.
From 1 June, BATS Europe will increase its rebate for posting liquidity in CAC40, AEX25 and BEL20 stocks and three Euronext exchange-traded funds – which will be rolled out on BATS Europe from the same date – to
0.5 basis points from 0.20 bps, while keeping its rate for removing liquidity at 0.3 bps. The new rebate will be subject to a €50 billion cap of notional value traded on BATS Europe.
Inverted pricing schemes pay higher maker rebates than they charge in taker fees, meaning that the platform effectively loses money for each trade. These schemes are typically employed to boost market share.
BATS Europe has become the second European multilateral trading facility to target Euronext with price promotions. On 1 May, fellow MTF Nasdaq OMX Europe started paying 0.15 bps for adding liquidity in Euronext stocks and the same for removing it, effectively making trading Euronext stocks free on the platform, assuming a 50:50 maker-to-taker order ratio.
“A diverse group of market participants has connected to the BATS Europe system and we have made significant progress in market share since our launch last October. With inverted pricing in June, we seek to add to market share gains in the major Euronext indices and to support the launch of trading in three ETFs on our platform,” said Mark Hemsley, CEO of BATS Europe.
BATS’ latest pricing promotion is similar to its strategy for gaining market share in the US in January 2007 and September 2007. According to the Fidessa Fragmentation Index, a weekly analysis of where trades are executed in Europe, BATS Europe had a share of 2.57% of AEX25 stocks, 1.29% for BEL20 stocks and 2.82% for CAC40 stocks in the week ending 15 May.