Fresh e-mail from my broker Alex tonight, highlighting all the tremendous benefits TOM will have for Jack the retail investor.

Just in time, because my investment portfolio has seen better days. Alas, no such positive thing. Retail investors won’t see a penny and market makers are forced to leave Euronext for Tom. Liquidity providers on Euronext are running a showroom operation.

1. The fees for trading options at Alex and Binck aren’t lowered. The money saved with matching retail option trades on TOM instead of Euronext is not passed on to clients. Only when a better market exists on Tom, investors would be better off. That’s a hypothetical situation, as the quotes on TOM won’t be any tighter than Euronext. See next point why the market spread on TOM will be wide.

2. All retail trades will be matched on TOM. When there’s a better price on Euronext, your order get executed on TOM against the Euronext prices. Some kind of a copy paste procedure. This means the option orders from Binck and Alex customers will never reach the Euronext markets again.

This time Euronext has got a point. Euronext is running a showroom for the option market with the liquidity providers as salesmen. Customers are forced to do their transactions somewhere else. Assume, for sake of the argument, Euronext decided to call it a day and stop the whole option market – could TOM just continue with their lean organization? Guess not.

All market makers will be forced to connect to the TOM MTF, based somewhere in Scandinavia, to be able to compete for retail orders. The responsibility for price discovery stays at home at Euronext. The consequences of this TOM MTF are far reaching, think about it for a while. To be continued.

Link (Dutch, including a video).

Jack
Jack