NYSE Euronext, a global exchange group, has targeted Q3 2009 for the completion of a common infrastructure that links all its European trading platforms.
The group currently operates two multilateral trading facilities (MTFs) – the SmartPool non-displayed trading facility and the NYSE Arca Europe displayed platform – in addition to its four regulated cash equities markets in Lisbon, Amsterdam, Brussels and Paris.
“Given the reduction in trade sizes across displayed markets, we have had a lot of interest from clients in using dark functionality,” Yvette Roozenbeek, acting CEO, SmartPool, told theTRADEnews.com. “The goal for us is to allow investors access to a common European infrastructure, where they will be able to hit liquidity on our other European trading services – the Euronext regulated markets and NYSE Arca Europe – through our routing capabilities.”
In February, NYSE Euronext migrated its European cash equities trading to the Universal Trading Platform (UTP), a single group-wide access point and trading engine. Customers can now access all the trading platforms using the Common Customer Gateway and Secure Financial Transaction Infrastructure elements of the UTP, but SmartPool’s matching engine is not yet connected to the platform. NYSE Euronext hopes to add SmartPool’s engine to the UTP in the coming months.
“The evolution of onward routing services by MTFs is still in its infancy in Europe,” said Roozenbeek. “However, as we upgrade our routing functionality in the coming months and add SmartPool to the UTP in the third quarter, we expect that our clients will make more use of these kinds of services.”
Orders on SmartPool can be routed on to Euronext’s regulated markets, but Roozenbeek added that the firm is in discussions with the FSA and the Committee of European Securities Regulators (CESR) over the conditions under which lit and dark orders can interact, given current regulatory scrutiny of the use of pre-trade transparency waivers under MiFID. However, SmartPool has not had any regulatory intervention over its use of the price-reference waiver, which allows trading venues to forego the publication of pre-trade data, as long as stock values are pegged to those of an external, reliable market.
In keeping with its desire to harmonise trading across its European operations, NYSE Euronext plans to introduce an integrated pricing structure for its European regulated markets and MTFs on 1 April.
Under the plans, the group will impose a single fee structure for all stocks trading on its four regulated European cash markets. Exchange fees will be abolished and the group will charge a fixed fee per order rather than per trade. Customers will only be charged for the first execution in an order and any further transactions from the same order will be free.
Agency flow will be charged at €1.40 per order and principal flow will attract a €1.25 fee per order between one and 550,000 executed orders per month and a €0.70 fee above 550,001 executed orders per month. Fees are capped at 1.9 basis points for agency flow and 0.9bps for principal flow. A daily order-to-trade ratio of 100:1 is applied, above which there is a surcharge of €0.10 per order.
The pricing overhaul also includes a new fee structure for SmartPool, designed to encourage more high-frequency flow on the platform. Algorithmic and direct market access trades will be charged at 0.5bps per trade, as will routed transactions to regulated markets. Blue-chip stocks with an average daily trading value of over €50 million, will be charged at a flat fee of 1 basis point, while the next most liquid shares as defined by CESR will be charged at 2bps.
As previously announced, NYSE Arca Europe will charge 0.15 bps for both passive and aggressive executions. Trading on NYSE Arca Europe will qualify members for discounts when executing on NYSE Euronext’s regulated markets. A trader executing a certain amount on the new MTF will be able to trade an equivalent amount on the regulated markets at a 0.15 bps rate charge for passive executions and 0.25 bps for aggressive executions.