More market share for TOM

16 Apr 2014

82d43db06190ab883d2500dde13aed831The volume in the options market at Euronext Amsterdam will decline in a few months. TOM will tweak their routing model, capturing a few more percent of the retail order flow.

Best price guarantee

Currently, the retail orders from brokers Binck and Alex will always be executed on TOM. They have a “best price guarantee” – when the price on Euronext is better, the retail client gets execution on TOM against Euronext’s prices.

Stat trades

The trade itself is executed on Euronext, but moved to TOM thanks to market makers who are willing to take these positions on their books. They won’t really notice, apart from building up long/short positions in certain strikes on Euronext/TOM. This volume is executed on both TOM and Euronext. They call this “STAT” trades.

In a few weeks TOM will tweak this model. Market makers can opt-out for the hedge on Euronext. When client order comes in and the price on Euronext is better, it will be executed on TOM and randomly given to market makers who participate in this schedule.

Basically, market makers suddenly don’t have to quote anymore – they will do trades on other people’s quotes anyway. And this flow will never reach Euronext again. In the beginning of May this schedule will start with DSM.

ABN AMRO

As shareholder in TOM, the state owned bank ABN AMRO will finally connect to the exchange in a few months. Clients will be connected to the Smart Order Routing (SOR) – in contrast to Interactive Brokers. Another bank lined up for TOM is BNP.

No lower fees

The retail investor doesn’t benefit at all from the competition between TOM and Euronext. Fees aren’t lowered, nothing to choose. Partly because the brokers will just pocket the lower fees at TOM.

53 Responses to More market share for TOM

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anonymous

April 16th, 2014 at 7:01 am

Wow, first, what a letdown!

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anonymous

April 16th, 2014 at 8:47 am

second, i agree, you are a letdown to your mother

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anonymous

April 16th, 2014 at 9:23 am

I wasn’t down for yours though =D

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anonymous

April 16th, 2014 at 9:43 am

Same thoughts your mum had for me, let’s have a family orgy this long weekend, it’s time for a showdown, race to the climax

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Edwin van der Schoot

April 16th, 2014 at 10:40 am

Strange: so BNP Paribas agrees to take a share in Euronext, just like ABN Amro, and than screws its own asset?

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anonymous

April 16th, 2014 at 11:25 am

so if bnp links upto tom, who get’s the benefit of low costs, bnp? or there is another broker between bnp and tom?

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anonymous

April 16th, 2014 at 12:20 pm

@11:25 BNP itself. Euronext charges 40 cent per option contract, TOM only 20 cent.

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anonymous

April 16th, 2014 at 1:18 pm

I don’t get it.

Suppose the market is 4.10 – 4.20 on both Euronext and TOM. Suddenly someone wants to buy on Euronext and place a 4.15 buy order. Market makers are not going to take this order because it is the midprice.

Seconds later someone on TOM places an order to sell at 4.15. Then TOM or a MM is obligated to sell the order on Euronext and buy it on TOM and take thereby a small loss (due to transaction costs)?

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anonymous

April 16th, 2014 at 1:25 pm

In America there are option exchanges who charge a fee to execute a transaction and there are others who pay the broker after an execution.

Does the latter also exist in Europe and why do they do that (paying instead of charging)?

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anonymous

April 16th, 2014 at 1:49 pm

Isnt optiver the real gainer with gain in TOM ?

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anonymous

April 16th, 2014 at 2:40 pm

so if bnp gets direct savings from tom, why is Edwin van der Schoot wondering about bnp screwing up its investment in euronext, does he not understand that euronext is going down with or without bnp, bnp needs to be fwd looking, not stuck in past

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anonymous

April 16th, 2014 at 2:46 pm

how is optiver the real gainer – through lowering of exchange cost and increase in the value of its investment in tom?

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anonymous

April 16th, 2014 at 3:29 pm

They were the guys who conceived TOM. IMC and ABN piggy backed later. Not sure how VC works in NL, but by silicon valley standards they were the Series A investors.

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anonymous

April 16th, 2014 at 4:02 pm

Considering how little money TOM makes and how much they put in, they were probably happy for someone else to pay part of the start-up costs. TOM was never set up with the goal of making money as an exchange. The goal was lower fees and getting a bigger share of the retail order flow (Binck was the other ‘series A investor’).

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anonymous

April 16th, 2014 at 6:06 pm

‘I don’t get it’

so let’s re-read the post about Stat trades

‘The trade itself is executed on Euronext, but moved to TOM thanks to market makers who are willing to take these positions on their books. They won’t really notice, apart from building up long/short positions in certain strikes on Euronext/TOM. This volume is executed on both TOM and Euronext. They call this “STAT” trades’

do you get it now?

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anonymous

April 16th, 2014 at 6:15 pm

the question still remains, retail would prefer exchange with higher liquidity to get better execution quality, why would you let a broker direct your trades to venue with lower execution quality when there is no cost saving to the end user, how stupid are the end users?

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anonymous

April 16th, 2014 at 10:24 pm

anyone know if imc or optiver are among the six hft firms that got subpoenaed by new york ag schneiderman?

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anonymous

April 16th, 2014 at 11:08 pm

who cares, next

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anonymous

April 17th, 2014 at 11:07 am

well I care!

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anonymous

April 17th, 2014 at 11:19 am

don’t you have anything better to do in life than gossip about who got subpoenaed by schneiderman

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anonymous

April 17th, 2014 at 4:04 pm

I doubt IMC got subpoenaed. IMC would make more money if it did the shady stuff that Schneiderman is worried about.

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anonymous

April 17th, 2014 at 5:09 pm

no you are looking at it wrong, maybe imc is doing it, and if not for the shady stuff, they would actually be loosing money for the firm

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anonymous

April 17th, 2014 at 6:56 pm

except that I know exactly how IMC is making money.

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anonymous

April 17th, 2014 at 7:26 pm

how?

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anonymous

April 17th, 2014 at 7:35 pm

How about

Geneva Trading
Belvedere Trading
3Red
CTC

did they all receive a subpoena ?

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anonymous

April 17th, 2014 at 8:13 pm

no?

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anonymous

April 17th, 2014 at 9:16 pm

Jump and Tower might get in serious troubles, but definitely not IMC

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anonymous

April 18th, 2014 at 12:54 am

define ‘serious troubles’

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anonymous

April 18th, 2014 at 9:22 am

Jack, can we ban anyone using the word ‘define’?

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anonymous

April 18th, 2014 at 10:46 am

define `ban’

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anonymous

April 18th, 2014 at 10:49 am

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anonymous

April 18th, 2014 at 1:55 pm

define ‘Jack’

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anonymous

April 19th, 2014 at 9:33 am

Chopper Trading and Tower Research Capital are part of 6, with Virtu just delaying their IPO you have 50%

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anonymous

April 19th, 2014 at 1:04 pm

yes, that 50% was reported by bbg 50 days ago, what’s new

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anonymous

April 19th, 2014 at 1:26 pm

Virtu speculation is new and also reasonable, which might be the 4th company .

Reminder for our kind readers: Tower Capital Research, Chopper Trading, and Jump Trading are officially targeted

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anonymous

April 19th, 2014 at 2:37 pm

you ‘might’ be very well informed fella, next

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anonymous

April 19th, 2014 at 6:05 pm

If Chopper Trading starts taking heat, the founder will probably call in favors for a little return on his Democratic Party donations

http://abcnews.go.com/Blotter/obama-clinton-fundraiser-rajiv-fernando-appointed-national-security/story?id=17153449

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anonymous

April 19th, 2014 at 6:30 pm

Virtu is not one of the six.

From http://www.bloomberg.com/news/2014-04-17/high-speed-trader-virtu-said-questioned-in-n-y-inquiry.html

“A person with knowledge of the matter said this week that six high-frequency trading firms have received subpoenas as part of Schneiderman’s investigation, including Jump Trading LLC, Chopper Trading LLC and Tower Research Capital LLC. Virtu was asked for similar information in a letter of inquiry, according to the person with knowledge of the matter. This could be escalated to a subpoena if the company doesn’t comply voluntarily. “

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anonymous

April 19th, 2014 at 8:19 pm

Virtu speculation is new and also reasonable, which might be the 4th company

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anonymous

April 19th, 2014 at 8:36 pm

what’s wrong with raj calling a favor, is it because non-whites are doing it this time, whites have been doing nepotism and slavery for god knows how long, now suddenly they don’t like the rules of game anymore

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anonymous

April 19th, 2014 at 9:17 pm

LOL, yeah this is the first time a dark skinned man tied political contributions to payback….in Chicago.

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anonymous

April 19th, 2014 at 9:37 pm

chicago ain’t nothing, come home to papa in jersey

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anonymous

April 19th, 2014 at 10:27 pm

Tower are especially dodgy.

This was setup by the guys from Lime Brokerage, who in turn was setup my the man who built LimeWire. Yes the fire sharing app (he made a lot of money when he sold it) from ye ole days that would infect your PC with malware and spam you with advertising, but at college you used it anyway because of the ‘free’ music.

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anonymous

April 19th, 2014 at 11:33 pm

so clearly, they are dodgy

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anonymous

April 20th, 2014 at 2:12 am

Have you notified the SEC of your findings? Sounds pretty serious.

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anonymous

April 20th, 2014 at 12:07 pm

of course, that’s why –

Virtu speculation is new and also reasonable, which might be the 4th company

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anonymous

April 20th, 2014 at 10:37 pm

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anonymous

April 21st, 2014 at 4:19 am

what a muppet, if he doesn’t get any better than his reserve price, then maybe he should make his reserve price more conservative, and of course stop wasting his money on his trading desk, fire ‘em and hire tradeworx, much better value for money, problem solved, next

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anonymous

April 21st, 2014 at 4:50 am

….next – ok world peace then genius.

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anonymous

April 21st, 2014 at 5:13 am

ah, you my friend have lost touch with the survival of the fittest, as long as we see each other as competitors in a world of limited resources, world peace by definition can not exist, genius, ain’t i, next

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anonymous

April 21st, 2014 at 5:22 am

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anonymous

April 21st, 2014 at 6:57 am

neo-darwinists took darwin out of context – its not literally survival of the fittest – but your a genius so i will let you figure that one out.

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anonymous

April 21st, 2014 at 7:58 am

no i am not a real genius, i was just pretending to be, pls help me figure this one out, i really don’t want to google ‘neo-darwinists’

on second note, it doesn’t literally have to be survival of the fittest, as long as you are competing in world of geniuses, the one with less would be left behind, and would obviously multiply like rats and then try to come back through 99, current income inequality being a prime eg of it

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