Major news today in the derivatives exchange landscape. The global retail broker Interactive Brokers (IB) will connect to TOM, The Order Machine. The official press release is short on details, but suggested the market share in Dutch options would surpass the 50% for TOM.
Depending on the exact details, this could be true. If all order flow will be routed to TOM by default, there won’t be much volume left on Euronext (apart from market makers trading with each other).
No TOM Smart Order Routing
It’s important to know IB will connect directly with TOM, without using TOM’s smart order router. IB has got it’s own smart order router for the US market. Unsure if they will use their own smart routing. The main point is the fee for trading on TOM with IB. The spreads in the market are the same.
For sure it won’t be able to beat DeGiro, with 85 cent per option contract.
Interactive Brokers is a listed company, and the parent of famous market maker Timber Hill. In the Netherlands IB is present with labels of Today’s and Lynx.
Price discovery still at Euronext
Currently, the price discovery process happens fully at Euronext. This could change with this new deal. Then again, it’s too soon to draw big conclusions. The press release was short, and one of the few facts was incorrect. Tried it myself, the connection with TOM wasn’t operational on March 24. Time will tell.