Seven European exchanges and four multilateral trading facilities (MTFs) have agreed to adopt a common tick-size regime proposed by the Federation of European Securities Exchanges (FESE) as part of a continuing effort to harmonise tick sizes across the continent.
Before the agreement, 25 different tick-size regimes were used in Europe.
The proposals follow a market consultation conducted by FESE in May. The federation has been in negotiations with MTFs and the London Investment Banking Association (LIBA) about harmonising tick sizes since March. FESE, LIBA and the MTFs have now agreed use of four tables which standardise tick size increments.
Nasdaq OMX, Oslo Børs, the London Stock Exchange (LSE) Group and SIX Swiss Exchange will use FESE table two, while BME, Deutsche Börse and NYSE Euronext will adopt table four, which allows for the widest increments. MTFs Chi-X Europe, BATS Europe, Nasdaq OMX Europe and Turquoise have committed to adopt the same tables as the exchanges according to the same timelines and will not make any further tick-size changes before the timetable agreed for each market.
The exchanges will implement the changes within a range of two weeks to six months depending on the needs of their users.
Because the LSE and the four MTFs have already moved to FESE table one, which lists the finest increments, for 14 UK stocks, these stocks will remain at their new tick size levels pending further discussions.
While the agreement is clearly a first step, as it only included seven of FESE’s 42 EU members, it has received praise from exchanges and MTFs involved in the negotiations.
“FESE has brokered a compromise today between regulated markets, LIBA members and other trading venues. The agreed solution has the potential to stop the recently initiated ‘race to the bottom’ with regard to excessively granular tick sizes, and support the liquidity and efficiency of European equity markets,” said Frank Gerstenschläger, FESE vice-president and member of the executive board of Deutsche Börse, in a statement. “This will eventually benefit our customers and investors alike.”
Charlotte Crosswell, president of Nasdaq OMX Europe, added, “We are very pleased that the FESE consultation has led to a roadmap that we can all agree on to harmonise tick sizes. This will benefit all our customers and will bring greater consistency and clarity to European equities trading.”