Somehow Binck reminds me of Van der Moolen in their last months. A listed company and a board which seems to have lost touch with reality. That’s nice when writing a kind of financial blog. Expected a quiet December, but voila : Binck. Time to get the popcorn.
SOR functioning poorly
Contender DeGiro showed credible evidence the Smart Order Router (SOR) of TOM doesn’t function properly. Binck is partly owner of TOM and sends all customer stock orders to this SOR, so kind of a big deal here.
Similar to Flash Boys, the book by Michael Lewis, the customer’s stock orders are routed to several exchanges (Chi-X, TOM, Euronext). But as some exchanges are being reached earlier than others, there’s a window of opportunity for HFT traders to take advantage of the order. (Research paper in English: pdf)
Even professor Menkveld, a very cautious scientist specialized in securities trading, made a relatively straight conclusion “there really seems to be a problem here” with these order executions. Of course, too early to draw final conclusions (maybe it isn’t TOM’s mistake but Euronext is to blame, for example) and more research is required etc.
Hilarious press release
That was last week. Back to the present. Binck released a hilarious press release. They don’t contest the evidence, but still demand rectification from DeGiro. Trying to get the attention away from the ball : the facts presented by DeGiro. In addition Binck claims DeGiro has been manipulating Binck’s own share price. Because the fall in the stock “can’t be explained by other factors” than the news from DeGiro. How sweet.
Remember the pointless lawsuits from Euronext against TOM? Suddenly TOM looks like a fat old fashioned institution, used to a monopoly and unable to compete against a new contender.
Reaction from DeGiro
Reaction from Gijs Nagel, head of DeGiro. Nothing to correct here, the evidence is clear. Here’s the Word document with the official reaction. It’s in Dutch, English version will follow tomorrow (update : here). A simple demands for Binck from DeGiro:
Has a HFT trader taken advantage in 11 of the 12 stock orders, by lifting/hitting orders in front of the customer? Yes or No?
Any other reaction would be a distraction from the real discussion. What a great position, when you can ask such a simple question. Binck is maneuvering itself in an impossible position. I’m pretty confident Binck will try to duck the question, denying the flash trades is very tricky given the evidence. This is a text book case of ignoring the first law of holes. If you find yourself in a hole, stop digging.