imagesThe alternative options exchange TOM is gaining speed. Last thursday the ten millionth option contract traded and market share climbed to 28% percent of the combined Euronext / TOM volume. However, it’s striking both exchanges agreed on ignoring the big elephant in the room.

Increasing market share

First, the good news. Over time, clients of Binck will be closing their positions on Euronext and every new position will be traded on TOM. This will result in some five percent more market share for TOM. In addition, some new brokers will be connected soon. The shareholder ABN AMRO will connect in a few months, and also Interactive Brokers will probably join in (including Lynx). Their market maker Timber Hill recently signed up as liquidity provider. With these new brokers, the rival exchange Euronext will be overtaken in market share. Last week’s market share was 33% for the index options and 26% for the stock options (link – pdf)

Don’t mention the Germans

The bad news. Euronext and TOM have agreed to ignore the German exchange Eurex – it will make their market shares looking better with leaving the third exchange out of the equation. Dutch options can be traded on the Eurex for nearly a decade.

The flow traded on Eurex is often bigger than TOM. Checked a few stocks for last week’s turn over.

grafiek

It’s obvious Euronext is still the biggest exchange in the stock options on Dutch large caps. In ING and Royal Dutch Shell it’s doing 65% of the total market. However, in options on Arcelor Mittal, most of the flow is executed outside of Euronext. TOM is reporting a market share of 29% in Mittal options, overstating the true market share with 10 percentage points.

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With Eurex doing comparable or even more volume than TOM, this brings us to the question whether the clients really do get the best execution. The “TOM Smart Execution” which would compare prices faster “than the blink of an eye” between markets apparently only works for two markets. If TOM’s mission is serious about giving the best execution for clients – they have no choice but to add Eurex. 

Finally, it’s about time to cut the fees for retail option trading, almost 3 euro’s doesn’t make sense. With Lynx buying Todays, there may be renewed price competition.

On more thing. For those who don’t use twitter, possible to stay tuned for updates via Facebook as well. Will be bringing an interesting scoop in a few weeks.

Update

Thanks to @exTweets, a more in depth analysis of the market share in Dutch single stock options by TAGaudit, in Best Execution – Spring 2013. Page 86.

Jack
Jack