The London Stock Exchange (LSE) will introduce a new pricing schedule for trading on its UK order books from 1 September, abolishing the rebate for providing liquidity it introduced on the same date last year.
The LSE said the new charges will balance the charges applicable to each side of a transaction and substantially lower the thresholds for volume discounts, meaning that a greater number of firms should benefit from incentives.
Under the new schedule, the LSE will charge 0.45 basis points per trade for the first £2.5 billion of value traded, 0.40 bps for the next £2.5 billion, 0.30 bps for the next £5 billion and 0.20bps for all subsequent value traded. The charge for SETS Internaliser trades, which do not incur post-trade costs, is 0.10 bps.
The exchange has also introduced incentives for trading in less-liquid names. Registered market makers in small company securities will pay 0.20 bps a trade.
All charged trades are subject to a reduced minimum fee of £0.10 per side, down from £0.25, and there is a 0.25 bps surcharge on aggressive trading (i.e. removing liquidity) in excess of 70% of total value traded.
The exchange said it changed the tariff because equity market valuations have fallen since the last tariff was introduced, rendering the old model inappropriate.
Although the LSE originally introduced the maker rebate to attract algorithmic and start-arb flow, a spokesperson stressed that it still aims to attract this type of flow.
“By spreading the costs between those on both sides of the trade, we will have a tariff that supports many different trading styles and incentivises supply and demand equally,” the spokesperson said. “Also, all trades now count towards the volume discount, making them more achievable.”
The spokesperson added, “Not all stat-arb strategies are geared to liquidity provision. The fact that the volume discounts are easier to achieve will be a big benefit for these users, as will the fact that the minimum fee per side is lower, meaning more efficiency for those who execute smaller trades.”
The LSE currently charges fees for aggressive executions in large-cap stocks that range from 0.75 bps a trade to 0.45 bps a trade, depending on the value traded per month, and pays rebates for passive executions that range from 0 to 0.40 bps. To hit the lowers taker fees, members need to trade more than £30 billion a month on the exchange, and to earn the highest rebates they need to be trading more than £25 billion a month.