The London Stock Exchange and pan-European multilateral trading facilities (MTFs) Chi-X Europe, Nasdaq OMX Europe, BATS Europe and Turquoise have agreed on a list of 12 FTSE 100 stocks that will trade with finer tick sizes on their respective platforms.
The 12 stocks are: Anglo American, AstraZeneca, Barclays, BHP Billiton, BT Group, Lloyds Group, Rio Tinto, BP, GlaxoSmithKline, HSBC, Royal Dutch Shell and Vodafone. The changes will be implemented by the trading venues on 3 August.
The change follows an agreement reached by the four MTFs, brokers and exchanges on 30 June to harmonise tick-size regimes Europe-wide and implement a set of tick-size tables devised by the Federation of European Stock Exchanges (FESE). Under the agreement, the MTFs agreed to adopt the same tick size tables as the relevant primary markets within the same timeframe.
While the London Stock Exchange opted for FESE table two for FTSE 350 stocks, the exchange and the MTFs agreed that a subset of the most liquid FTSE 100 stocks should use the finer tick sizes in FESE table one, and continued talks after 30 June to determine the final list of stocks this should apply to.
Prior to the 30 June agreement, the four MTFs and the LSE implemented FESE table one for 14 FTSE 100 stocks, prompted by an initial shift to table one for 9 FTSE 100 stocks by BATS Europe and Turquoise. While some characterised the move by the two MTFs as the start of a tick-size war, the platforms argued they had changed tick sizes in a bid to kick-start the tick size harmonisation process.
Along with the LSE, three other exchange groups – Nasdaq OMX, Oslo Børs and SIX Swiss Exchange – decided to implement FESE table two, while Spanish exchange Bolsas y Mercados Españoles, Deutsche Börse and NYSE Euronext adopted table four.
Finer tick sizes result in less price volatility and a reduced risk of slippage when trading against a volume-weighted average price benchmark but can lead to thinner liquidity at individual price points.
The tables proposed by FESE have varying tick size increments depending on price range. For example, FESE table one has a tick size of €0.0005 for stocks priced between €0.50 and €0.9990, while FESE table two has a tick size of €0.001 for the same price bracket.