Nasdaq OMX Europe, the multilateral trading facility (MTF), has said its new order routing service, developed in conjunction with investment bank Citi, is designed to attract greater liquidity to the platform.
The agreement will allow market participants to access both Nasdaq OMX Europe’s order book and other multiple pools of liquidity across Europe. Orders will be routed to Nasdaq OMX Europe’s order book first, before going on to other venues. The service is currently connected to Chi-X and Turquoise and will be connected to BATS upon its launch, which is scheduled for before the end of the year. Other MTFs will be considered as and when they go live. Primary markets will be added to the service, but there are currently no planned routing links to any dark pools.
Nasdaq OMX Europe, which is owned by exchange group Nasdaq OMX, is due to launch its pan-European trading service on September 26, when 25 stocks from the FTSE100 index will be available for trading as part of a staggered roll out.
“When an order comes into our routing engine, it will be scanned against our consolidated EBBO (European best-bid and offer) before going on our order book,” Charlotte Crosswell, president of Nasdaq OMX Europe, told theTRADEnews.com. “If it gets routed out, it will be given a price/time priority.”
At first, participants will be able to choose from three routing strategies. The first, known as a SCAN order, will attempt to execute against orders on Nasdaq OMX Europe’s book equal to or better than the EBBO, before routing to the external markets if required. If the order still remains unfilled, it will be posted back on Nasdaq OMX Europe’s book and not routed out again. A STGY order works in the same way but will re-route the order if it remains unfilled. A SPDY order works in the same way as a STGY, but will only route to other MTFs.
In a month’s time, Nasdaq OMX Europe plans to add the primary exchanges to the service (PRIME order), which will route orders out to exchanges and leave them until filled.
“We think the PRIME function will be especially attractive, as people can come and look at our book first before going to the LSE for example,” said Crosswell.
Citi will provide the high-speed execution platform for the routing service, which includes the Neonet XG Market Gateway product. Routing orders through Citi will add an extra one millisecond of latency.
“The new agreement means we have one FIX connection that is directed to Citi who are members of all the exchanges,” added Crosswell. “The main goal is to attract more liquidity coming through our routing engine in the first instance. This service gives us the capability to connect to those exchanges without being members but ultimately we will look for direct membership with the exchanges.”
Currently, it will cost 0.6bps to route to Chi-X, 0.9bps to route to the LSE, 1.0bps to route to the Deutsche Börse and Euronext Paris/Amsterdam and 1.4bps to route to the OMX Nordic exchange, Euronext Brussels and Borsa Italiana. However, these fees are set to revised in the near future.
Rival MTF Turquoise does not currently offer onward routing, although the platform’s COO Adrian Farnham recently said it plans to offer a vanilla onward routing product by Q1 2009 following demand from smaller brokers. Chi-X, the multilateral trading facility launched by Instinet Europe in 2007, has a routing service in beta testing ready for deployment in the coming months.