Eli Lederman, CEO of European multilateral trading facility Turquoise, has described the pricing scheme of rival trading platform Nasdaq OMX Europe as “untenable”.
“Nasdaq OMX is a billion-dollar company so I don’t suggest it will fail because it is doing this, but it has come to Europe with loss-making prices,” Lederman said at a panel discussion on new liquidity pools on Wednesday, hosted by market data provider Interactive Data. “It is completely untenable commercially for a public company to do this sort of thing. You have to wonder why they are doing it, but you certainly have to say that it can’t go on for long.”
On 23 October, Nasdaq OMX Europe announced an introductory pricing promotion, which boosted the rebate portion of its maker-taker pricing model to 0.25 basis points from 0.20 bps, and cut the fee portion to 0.25 bps from 0.30 bps. The promotion will begin on 3 November and will be reviewed at the end of the year. Assuming a 50:50 maker to taker ratio, the new price offer effectively makes trading on Nasdaq OMX Europe free of execution fees.
Lederman made the comments during a debate about connectivity to new execution venues. Fellow panellist George Andreadis, a director of investment bank Credit Suisse’s Advanced Execution Services division, said it was his firm’s intention to connect to as many trade execution platforms as possible.
“We will use our technology to source liquidity wherever it is,” he said. “We don’t care where it is as long as we’re able to get it if it shifts. Our execution policy is to hook up to everything with a heartbeat, and if it doesn’t have liquidity, we can review that later on.” Andreadis added that with the advent of FIX connectivity, the cost of linking up to several venues is relatively insignificant.
However, Turquoise’s Lederman suggested that economic realities would lead many sell-side firms to take a more selective approach to platform connectivity. “I don’t think that is the way the world should operate. People have to focus on costs. People are going to demand that a platform shows what is their real value and their real viability.”
Hirander Misra, chief operating officer of Chi-X Europe, agreed that recent testing market conditions and shrinking budgets would have an impact. “At times like this, resources are constrained across the board,” he said. “We are all doing more with less, and you really have to pick and choose well.”
Credit Suisse’s Andreadis remained adamant that client choice was all-important to sell-side firms. “I work with my clients to get them the best prices. If the best price happens to be on an alternative venue which only trades once a month, I’m going to grab that opportunity if I can. It comes back to how you use your technology to tap this liquidity,” he said.