30th March 2009
UPDATE FROM TURQUOISE
To The Turquoise Community,
Our new tariff schedule for trading on the Turquoise MTF takes effect
on this Wednesday, 1 April 2009, and I'd like to explain the rationale
for improving our rebates.
We want to build our market share, yes, and we want the industry to
stand up and take control of its destiny. We're asking people on the
buyside and the sellside to challenge the status quo, the prevailing
wisdom that the switch to MTFs should be gradual. It doesn't have to
be gradual, and it shouldn't be. The buyside will be better served
when their brokers use MTFs more, and the sellside will benefit from
the better economics.
More and more often, the venue with the higher likelihood of execution
and price improvement is an MTF with modern technology, better
functionality, and with better economics. And more and more often, an
order that doesn't go to an MTF is one that could have gotten a better
execution.
Better for the client, better for their broker.
We believe that the trading community needs a catalyst to move forward
on this issue, and we're improving our rebate programme to focus
people's attention on the opportunity before them, the opportunity to
push the status quo to one side and choose to move for better
execution and better economics.
Thank you, as ever, for your attention.
Eli
Please see a few FAQs about what we are doing...
Why are we implementing this improvement?
We want to catalyze progress. We want our members and others to
reflect on the value of the service we offer, and to take
steps to maximize the opportunity in this difficult market
environment.
What's the difference?
To complement our industry-leading lowest "taker" fee, our new base
rebate for the price "maker" now meets the other MTFs at 0.20 basis
points.
Anything else?
Yes. From 1 April, we offer an enhanced rebate that rewards members
whose trading exceeds a simple volume threshold. These are volumes
that are eminently reachable for many participants.
How does this benefit the buyside?
Banks and brokers increasingly use smart order routers to post their
clients' passive orders to MTFs, not just to the exchanges we're
replacing. The best smart order routers, the ones that set the
standard, look ahead to the likelihood of execution to determine the
best venue. And we're getting extremely positive feedback from the
institutions that employ these best models.
Why would a passive order be more likely to fill on Turquoise?
There are three reasons. First, most smart order routers today look
first to Turquoise to hit a bid or lift an offer because we have the
lowest taker fee. Second, we have a number of members who have
deployed high-volume, active trading strategies. Third, we have
shorter queues, so if you want to post at the primary best bid or
offer, it's likely that you'll be closer to execution on
Turquoise. The best smart order routers look at this depth in the
moments before making each routing decision. We have direct feedback
from members who look at the depth on every venue, and post their
at-the-best quotes to Turquoise because the queue is often shorter.
Does it follow that people who analyze their fill rates
should see Turquoise outperforming?
Yes, and they report back to us that we have great fill rates for
marketable orders, and that these fill rates have improved steadily
since we started trading. We're working to establish a venue-neutral
study of this to quantify the effect.
Would an increase in order flow to Turquoise lead to a
larger migration of trading away from the incumbents and towards MTFs?
It should, yes, begin the migration from the status quo to an
environment characterized by better execution and better
economics. Sounds like a positive development for the industry in
2009, including for end-investors who'll benefit from price
improvement.
Please click here to download the new tariff schedule effective 1st April 2009.
