Turquoise, a broker-backed multilateral trading facility (MTF), has announced a new tiered pricing structure amid claims that buy-side traders are not benefiting from lower execution costs resulting from competition between European trading venues.
From 2 February, Turquoise will pay higher rebates to members who trade more than 2% or 3% of their market-wide volume as a total of consideration traded on the MTF’s integrated market over a calendar month. Firms that trade more than 3% of market-wide volume will receive a rebate of 0.22 basis points, while those members trading in excess of 2% will receive a rebate of 0.20 bps. In addition, all members will benefit from a higher rebate of 0.24 bps for passive orders in Austrian, Portuguese and Spanish stocks, when they start trading there on 16 February. Previously, all members received a 0.12 bps maker rebate; the 0.28 bps taker fee remains unchanged.
“The next phase of competition among European trading platforms will focus on costs, value and innovative new services,” said Eli Lederman, CEO, Turquoise. “We’re pleased to be able to offer Turquoise members these new prices, and we expect the value we offer to attract considerable new liquidity to our MTF to the benefit of our entire trading community.”
However, in response to a call for evidence from the Committee of European Securities Regulators (CESR) on the impact of MiFID on secondary markets functioning, both asset management firm Legal and General Investment Management and the Investment Management Association, a buy-side trade body, argued that the lower trading costs of MTFs are not being passed on to end-clients.
“We have not yet experienced the anticipated lowering of explicit costs from the increase in venues,” read the Legal and General Investment Management response. “Any cost savings in exchange fees realised by the broker have not been directly passed on to us as the underlying client.”
The IMA, which represents asset managers in the UK, added that lower MTF costs have only been passed on to buy-side clients where they are able to “exert sufficient pressure”.
Jason McAleer, head of trading at Newton Asset Management, echoes L&G’s submission and says his firm has looked for other ways to reflect the lower costs of trading in Europe.
"We have not seen any explicit cost reductions as a consequence of lower MTF fees,” he told theTRADEnews.com. “But to circumvent this, we have negotiated our commission levels to reflect which execution channels we use the most. We don't expect our brokers to offer us a reduction in costs because of the current climate, but we are taking a proactive attitude toward managing trading costs."
All pan-European MTFs, including Chi-X, BATS Europe and Nasdaq OMX Europe, have opted for maker-taker style pricing structures, where market participants are rewarded for posting liquidity and charged for removing liquidity for order books. The London Stock Exchange is so far the only exchange to have followed suit, introducing its own tiered rebate system on 1 September 2008.