Oslo Børs has become the latest European exchange to impose a fee aimed at members that cancel an “unnecessarily high” proportion of their orders.
From 1 September, Norway’s native bourse will charge a fee where the number of orders relative to each trade carried out exceeds 70. The order activity that will be included in the calculation of this ratio will principally relate to orders that are cancelled or amended within one second, and where the change does not contribute to improved pricing or volume.
Orders that remain open in the order book for some time, or which are updated in a manner that makes a positive contribution to market quality by reducing the spread between best bid and best offer or by increasing order book depth will not be affected.
The aim of the exchange is to discourage orders that “do not contribute to the effective and sound conduct of stock market trading”. The bourse has stated that excessive order activity has the effect of reducing transparency and confidence in the market.
“It is in general the case that a market participant does not incur any costs by inputting a disproportionately high number of orders to the order book, but this type of activity does cause indirect costs that the whole market has to bear,” said Bente A. Landsnes, president and CEO of Oslo Børs. “The measure we are announcing will help to reduce unnecessary order activity that does not contribute to improving market quality. This will make the market more efficient, to the benefit of all its participants.”
Italy’s Borsa Italiana was the first European exchange to introduce a new pricing regime designed to penalise high-frequency traders and other firms with a high order-to-cancel ratio. The Italian bourse introduced its own order-cancel fee threshold, of 100:1, in April.
Meanwhile, Swedish regulator Finansinspektionen is considering issuing guidelines on market surveillance and monitoring, following an investigation earlier this year in which it concluded that greater potential for market abuse could arise from an increasingly fast-moving, high-volume marketplace.