Just a little more than a week ago Euronext Liffe presented the outcome of the selection process of liquidity providers. This website even presented a wonderful graph with all firms and their number of roles. Also brought the news of the end of some classes of weekly stock options.
Well, turns out not all this information has been correct. Euronext made a couple of mistakes, forgetting market makers in weekly options and messing up the ING/INO liquidity provider (regular and old ING options go combined, usually).
Here’s the official explanation by Euronext Liffe:
“Due to reviewed calculations related to Member’s track record on which decisions have been based certain results have been updated.” (pdf)
Sorry, that smells like bullshit. Calculations have nothing to do with it. The overstaffed exchange has forgotten all market makers in certain classes (weekly KPN and PHI). Don’t worry about mistakes (we’re used to it), but take it like man and admit it. Maybe regular press (FD) will buy it, but traders don’t believe in fairy tales.
Small market makers such as GDT and Klinkenberg (yes FD, that’s how to spell their name) are outrageous after Euronext announced to double the fees of non-quoting traders. They have a point. Small traders can’t always take on responsibility for quoting, but they do add liquidity in some cases. With the current tight spreads, their fees are unreasonable high.
The other problem is the capped maximum costs of professional block trades. These trades, arranged by brokers between firms, were capped at 50 euro. This has been raised to 200 euro. That’s having a serious impact and there seems to be no economic justification.
The new reality hasn’t dawned yet on Euronext. Market spreads have come down because of competition. With the new contender TOM around the corner, all transaction prices will come down. There will be no possibility of compensating this with raising costs somewhere else. NYSE Euronext is the result of a political delicate multinational merger – with stakeholders protecting jobs everywhere. Next year we will see massive job cuts at Euronext. The alternative isn’t very attractive : folklore.
(Original PDF with errors here)