German exchange group Deutsche Börse will introduce a new pricing model for users of its Xetra electronic trading system from 2 November in response to what it describes as the increasing price-sensitivity of equity trading. The exchange will also halve fixed per-order clearing fees for trades on Xetra from 1 July.
The exchange claims the new model will cut Xetra users’ trading fees by 13% based on this year’s volumes.
In response to a decline in Xetra’s average order size to €19,000 from €30,000 in Q3 2008, Deutsche Börse will cut the fixed clearing fee to €0.09 per Xetra order from €0.18 starting 1 July. The exchange said this would be particularly positive for small, fragmented orders.
From 2 November, it will further cut the fixed clearing fee to €0.06 and introduce a discount of up to 48% on all Xetra orders.
Under the plans, the exchange will phase out its Automated Trading Program discount scheme, which was introduced in 2004 and only applied to those using trading algorithms. It will also extend pricing incentives to all participants using Xetra 10.0’s new functionality, such as the Enhanced Transaction Solution (ETS) high-speed order entry interface.
Deutsche Börse said it had broadened the scheme to include all Xetra participants because, while algorithmic flow accounts for 45% of trading volume on Xetra, equities trading generally has become more price-sensitive, demonstrated by the increasing use of smart order routers designed to optimise transaction costs.
Deutsche Börse will cut transaction fees for non-persistent orders (speed-optimised orders that are removed from the book in exceptional circumstances, such as an outage) to 0.36 basis points from 0.48 bps for DAX stocks, exchange-traded funds (ETFs) and exchange-traded commodities (ETCs). It will abolish the minimum transaction fee (previously €0.60) and offer a transaction fee discount of up to 32% for all ETS non-persistent orders. The exchange will also increase the order size to which the upper limit of the transaction fee applies, with the exception of ETFs and ETCs, to €1.5 million from €375,000.
The exchange expects the effects of the fee cuts on total cash market revenue to be neutral.