A few weeks ago I noticed The Order Machine, TOM for friends, has been tweaking their statistics a little bit. In the market share of the Dutch option market both Dutch exchanges (Euronext and TOM) decided to leave Eurex out of the equation.

Not really correct, but still allowed. This time I’ve checked some other statistics supplied by TOM. The claim the option quotes on TOM are often tighter than Euronext Liffe always sounds suspicious. There isn’t any room at all to quote tighter than Euronext Liffe in options classes such as Aegon, Royal Dutch or Mittal.

“Better prices on TOM”

Nevertheless, TOM claims more than 12% of the option trades are executed against a better price than Euronext Liffe, and exactly 10% of the stock trades. These percentages have been even higher earlier this year. See the graph for the these percentages:

Ja hoor, heus waar

Really. This stock market at TOM should be wonderful. Sharper prices than Euronext, often. Option trades are executed frequently at better prices too on TOM. This leads to the following savings per order.

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On average the prices on TOM apparently are getting even better over time. The average saved cost per trade is gradually rising. Mind you, this is saved cost per trade not per contract. Hard to believe. Suppose the average order size is 5 contracts, this would imply in 12.8% of the trades almost 3 cent better execution. There’s no room for that in the current market.

Perfect percentages

It gets even better. Have a close look at the “better price” percentages in stocks and options on TOM. The numbers are too good. Up to April this year the percentages of better prices were not only high but also rounded. Impossible. The next months, May and June, had exactly the same percentages of “better prices” in the option market. Same goes for July and August. The better executions for stocks are exactly 10 percent again.


I’m no math wizard and have no degree in statistics, not afraid to admit it. But these numbers are estimates at best, and these estimates don’t make sense. Looks like they hired Diederik Stapel to fabricate some data. Their latest report already includes the numbers for September.

No market maker will believe the quotes on TOM are tighter. TOM is bragging each month about all the costs it saves for the retail investors. That’s getting a little difficult to maintain. There should be more variation in the percentages.

Reaction from Willem Meijer, CEO of TOM

Willem Meijer, chief of TOM, was ready to comment on the post above and isn’t short of text. Unfortunately it doesn’t address the main question ; how is it possible the remarkable high percentage of “better prices on TOM” are the same for May/June and for July/August? Such unstable percentages can’t be stable over a two month time span.

Thanks for sharing your thoughts on the TOM statistics. We welcome all comments and certainly we like to be pointed at possible omissions in our publications. This way the quality of our message increases. Meanwhile we changed the title in the cash ratios to “August” based on your remark. That was clearly a typo. We do have a clear vision for the future, but we of course cannot project the average savings for the whole month of September at the beginning of the month.

More importantly the statistics of TOM are not something we make up neither are these numbers estimates. You may expect from a professional organization like TOM, with professional shareholders all monitored by different regulators, we can’t just make up numbers as you suggest. It would go too far to hand over the independent audit reports on the methodology of calculations of our statistics, but nevertheless I’m willing to give you some more background.

Analyzing the two markets we see that competition is clearly working. Sometimes TOM MTF has a better price and sometimes NYSE Liffe has a better price and of course prices can be equal in both markets. Retail brokers using the Smart Order Router of TOM Smart Execution will benefit and receive the best possible outcome of the three scenarios described above for their orders. On equal pricing the benefit lies in the lower exchange fee and in case of better prices on TOM they benefit from both the lower exchange fees and the better execution price. There is no manual intervention to route the order to the best venue. The Smart Execution Algo makes this decision and keeps a log of the orderbook data of the two exchanges to prove it made the correct decision. We keep those records for a period of 5 years.  Clients have the right to ask their broker for such a proof of best execution by law.

Our data shows that last month in options 83% of the client orders were executed on TOM MTF. An order can only trade on TOM MTF if the price is equal or better to the price on NYSE Liffe. When the Liffe price is better we will send an order to Liffe. On the direct executable orders (orders at best or orders with a tradable limit) the Smart Order Router can calculate, using the recorded logs of data, what the realized difference between prices on both exchanges was per order. Simple math calculates the Euro savings value per transaction.  An order sent to TOM Smart Execution ranges on average from 6 to 10 lots per transaction. (varies with stock options or Index options). The August 2013 saving of approximately 15 Euro per transaction (directly executable order with a better price on TOM MTF) implies that between 1.5 and 2.5 cents price improvement was realized per contract .

A TOM MTF execution ratio of all orders of 83% still means that 17% of last month’s orders were traded on Liffe (at a better price). Without a Smart Order Router one would miss out on those better prices. We therefore recommend brokers to use Smart Order routing to get the best from both worlds.

Concluding it sounds reasonable to me to observe better prices (between 1,5 and 2,5 cents per contract) on TOM sometimes and see better prices on Liffe sometimes. By trading on one or the other market without a Smart Order Router these benefits would probable average out to zero. Although fees at TOM are merely 20 cents for retail compared to 40 cents on NYSE Liffe, using a TOM Smart Execution the retail broker sees the best of both worlds and is able to realize only  the positive difference of around 15 Euro per order executed on TOM MTF at a better price.

Any further comments are welcome.

Willem Meijer

CEO of TOM (The Order Machine)