US equity trading on NYSE Euronext fell to its lowest level in at least two years last month, but the exchange could see flow coming back its way following the impending introduction of message traffic charges at rival venues Nasdaq OMX and Direct Edge.
According to data from Thomson Reuters, turnover at NYSE Euronext last month was US$1.06 trillion in February, its lowest level for at least two years. This gave NYSE Euronext a market share of 25.6% last month, a 3.2 percentage point year-on-year decline.
Nasdaq OMX traded US$830 billion last month, giving it a 19.9% share of US equity trading, representing an increase on the 19% (US$809 billion) it traded in February 2011.
BATS Global Markets and Direct Edge, which operate two US equity exchanges each, traded 12.3% and 9.7% respectively last month, both relatively flat compared to February 2011.
Trades reported to the Alternative Display Facility, an off-exchange reporting channel managed by the independent securities regulator FINRA that includes trades conducted on electronic communications networks, dark pools and OTC trading, ended last month at 28.2%, slightly higher than the 26.4% recorded in the same period last year.
Overall US equity trading increased slightly month-on-month to US$4.17 trillion last month, from US$3.9 trillion in January, but remained flat compared to February 2011’s total of US$4.2 trillion.
The movement of equity flow between different trading venues could become more pronounced with Nasdaq OMX and Direct Edge planning tariffs that aim to clamp down on excessive message traffic. NYSE Euronext said it had no current plans to introduce its own scheme but said it would continue to evaluate ”market structure, customer demand and competitive moves”.
From 1 May, Direct Edge will introduce its Message Efficiency Incentive Program (MEIP) to both its platforms, which will reduce the rebates members receive if their message-to-trade ratio is above 100:1 by US$0.0001 per share. Registered market makers that meet certain other requirements will be exempted from the MEIP.
“The objective of the MEIP is to continue to provide members with order-management flexibility, while acknowledging the benefits to the market that come with more efficient participation,” read a member notice from Direct Edge. “It is important to balance the critical importance of technology to liquidity provision and market operation with effective message traffic efficiency incentives to acknowledge the costs that message traffic has on today’s markets.”
Nasdaq OMX plans to launch its own tariff from June and will take a similar approach to the IntercontinentalExchange by weighting its charges on the proximity of messages to the national best bid and offer. Members that exceed a 100:1 ratio under the scheme will be charged between US$0.001 and US$0.01.
A spokesperson for BATS Global Markets said the firm was in discussions on whether to pursue its own levy.