The largest Dutch online bank Binck announced a joint-venture with market maker Optiver. All orderflow of it’s retail customers will flow directly into the books of Optiver. It will start with stocks, but the goal is to expand the operation to derivatives as well. The plans were known before, but now it seems it will be reality soon.
Optiver will make a market in all major stocks on the the joint-venture labelled TOM, which stands for The Order Machine. This is a very suitable name, as it will be just a simple machine copying the prices of the real Euronext market. The financial markets authority approved the operation.
A good thing for Binck
This joint venture is a good thing for the online bank Binck. In stead of paying transaction fees to Euronext, it can keep the money. Maybe a slight discount could be given to the customer, but there’s no competition so that’s not necessary. By selling it’s customer flow to professional market makers it’s generating extra income.
Offering a best execution by taking account different exchanges (Euronext, Deutsche Borse, Chi-X,..) was a possibility, but the company seems to focus on selling the customer flow to Optiver.
A good thing for Optiver
Copying the prices of the real market is easy as long as you’re fast enough. All trades generate a little money instead of costing a little transaction fee. Optiver can decide to stay with the resulting position or in the worst case scratch it on Euronext. It will never make a loss.
Second, it will have more information on the Euronext order book than competitors. Limit orders which won’t be executed will appear in the books of Euronext. Only Optiver knows where those limit orders are, how big they are and the chance of remaining there when the market turns. Assume a situation Optiver did a large option trade and needs to sell shares in a stock like Akzo. They’re not forced to send two sided quotes, an iceberg offer on their TOM system will do the trick.
Finally, the best thing is rival traders on Euronext are forced out of business as the major source of retail flow will vanish. Less competition means more profit for the powerhouse.
Second, it will have more information on the Euronext order book than competitors. Limit orders which won’t be executed will appear in the books of Euronext. Only Optiver knows where those limit orders are, how big they are and the chance of remaining there when the market turns. Assume a situation Optiver did a large option trade and needs to sell shares in a stock like Akzo. They’re not forced to send two sided quotes, an iceberg offer on their TOM system will do the trick.
Finally, the best thing is rival traders on Euronext are forced out of business as the major source of retail flow will vanish. Less competition means more profit for the powerhouse.
Trouble for customers and the market
Binck customers may see a slight discount on the transaction fees. As there are no costs involved for Binck and Optiver can only make money in the trades, they should be getting paid by Binck instead of paying transaction fees. Furthermore, Binck’s customers will help creating a monopoly position for Optiver. Especially on the option market the spreads will widen and a disount on the transaction fee will turn out to be a joke.
Quoting stocks will turn into a waste of time and effort for the rest of the market. Most retail orders will be filled by Optiver, so quoting the stocks will be a risk without reward. Some traders will have a hard time, some companies will quit the market altogether.
Boycot Binck
I wouldn’t like to see Optiver having a first pick on my orderflow with Binck, so I’m leaving this broker. Other brokers are cheaper anyway – just plain laziness to stay with Binck for the last years. Too bad the troubles are too abstract for most clients.
* Update 24/6
Hat tip to IEX for their own neutral coverage of the story, summary of this post and a reaction by the official spokesman of the Binck/Optiver joint venture (all three links in Dutch).
Which broker will you go to now?
binck are shit and optiver are shit
try interactive brokers…it is cheaper than binck
http://www.lynx.nl (!)
What will liffe connect do ???
nonsense
as one of the initiators of this deal (it was a deal between alex en optiver) i van teel you that this is in favor of the custumers
1. costs will go down, because euronext is extremely expensive and they are cut out
2. other liquidity providers can join and i hope they will, the best price MUST win, "this is MIFID, stupid"
3. the deal was offered to other parties in the past, but they were NOT interested
4. i suspect that clients will be offered the choice; either go the Euronext en pay more, or go the TOM and pay less; its up to the client
5. optiver makes a lot of money, much more than Alex or Binck, why not grab a piece of the cake??
If Optiver is the only remaining market maker the spreads will detoriate. Less competition is bad for the customers in the long rung.
Try Interactive Brokers or the Dutch equivalents Today's or Lynx. Better and cheaper.
who will quaranty that other liquity providers will have the same capacity as optiver.
About Mifid and the best price rule, look what happened with the tick size and the amount of mutations in the orderbook because of the best price rule. Doesn't serve anyone.
According to me Interactivebrokers does exactly the same. Their client orders go their market makers first, they can decide to trade against it. Otherwise they will sent the order to the exchange or another platform. Especially in products with a big bid-ask spread this is a big advantage for them.
timberhill…
Dit hele zaakje stinkt en is nergens goed voor. Hoeveel platforms willen we er nog bij hebben? Juist in deze tijd, waarin meer transparantie van financiële producten/diensten nodig is, maken we het nog een stukje onduidelijker. Ooit gehoord van "counterpart risk"??? En wat stelt een GTC order nog voor wanneer je op deze wijze nooit meer vooraan ligt?
Love your Blog ! keep the good work.
What are the best Dutch online brokers?
> 3. the deal was offered to other parties in the past, but they were NOT interested
I cannot imagine no CEA was interested. I know at least one CEO who has talked about this and he was certainly interested. It is no rocket-science to understand how valuable first access to customer flow
>14. What are the best Dutch online brokers?
At least the cheapest is interactivebrokers
Any other name alternative to Interactive Brokers?
If you can, boycot the Dutch markets altogether for having authorities that allow something like this.
Try SaxoTrader from Saxo Bank. I believe their introducing broker in the Netherlands is darion capital management (www.darioncm.com)