So far for the dogs and gods, back to trading. The alternative exchange TOM has captured a large market share in the options market. Especially in the short term index options, Euronext Liffe lost more than half of their flow to their rival.

Futures underlying for options

Monthly options on the AEX index are usually priced with the corresponding future contract as reference price and as a hedge for traders. The volume in the future market is substantial, so there’s a lot of opportunity to grab for Willem Meijer and his firm. Even on very quiet days the volume rarely drops below 15.000 future contracts traded.

Future market at TOM deserted

The index future market on TOM opened on November 11th this year. The FTI futures are called XNLF at The Order Machine. However, what a surprise. The experiment with futures turned out to be a failure, with an open interest of only 69 contracts after three weeks. This means the real process of price discovery still happens at Euronext Liffe and the trading doesn’t migrate as easily as the option market did.

Latency issue

Playing copycat works as long as latency isn’t relevant, and connection with all traders worldwide is not required. Suppose this is a painful experiment for TOM. Apparently they can’t be seen as a serious exchange. Maybe the automatic order flow from the Binck and Alex customers is making them lazy. At least some razor sharp competition is still lacking among exchanges.

In contrast – the DeGiro online broker is routing everything to the good old Euronext Liffe. Charging their customers a fraction of the Binck fees.