Data vendor Thomson Reuters has launched a suite of pre- and post-trade analytical tools, including a consolidated price source, for the Japanese equities market to help buy- and sell-side traders take advantage of increasing liquidity fragmentation and price competition in the country.
While the Tokyo Stock Exchange (TSE) continues to dominate the Japanese equity market, with a 99% market share of overall traded volume, Thomson Reuters said that the country’s proprietary trading systems (PTSs), an equivalent to Europe’s multilateral trading facilities, collectively have the best price in Nikkei 225 stocks 60% of the time, measured by the time spent at the consolidated bid/ask. It added that the fragmentation, while small, presents an opportunity for buy- and sell-side traders to reduce trading costs.
The consolidated tape incorporates pricing from Japan’s traditional exchanges and the three major PTSs – SBI Japannext, Kabu.com and agency broker Instinet’s CBX Japan – to provide combined best bid/ask quotes and trade prices.
Thomson Reuters’ offering will be complemented by its web-based Equity Market Share Reporter (EMSR) tool, which provides historical fragmentation analytics. The tool incorporates the Fragmentation Score model, which allows firms to rank stocks by degree of fragmentation. EMSR also allows traders to compare liquidity, spreads and price performance trends across competing venues for a given stock or index and optimise routing policies accordingly.
On the post-trade side, Thomson Reuters has launched its Global TCA transaction cost analysis solution in Japan. Global TCA allows firms to monitor execution quality by analysing trading activity against consolidated cross-venue TCA benchmarks. This delivers performance statistics by order originator, execution venue, trading strategy and more.
“The launch of Thomson Reuters’ independent consolidated tape and fragmentation analytics will shine a light on hidden opportunities,” said Miftah Khan, global head of transaction analytics at Thomson Reuters, in a statement. “Our analysis clearly shows that traders and their clients in Japan are often missing an opportunity, since a significant portion of the time there is a better price for trading at an alternative execution venue.”
Mitsunori Fukushi, CEO of SBI Japannext Securities, added, “Both buy- and sell-side market participants in Japan have been crying out for a more competitive trading environment where prices could be improved. Thomson Reuters’ analytical tools should really help this process accelerate as more people are able to fine-tune their trading strategies to discover deeper, rich liquidity at better prices.”