TOM and statistics
The alternative options exchange TOM is gaining speed. Last thursday the ten millionth option contract traded and market share climbed to 28% percent of the combined Euronext / TOM volume. However, it’s striking both exchanges agreed on ignoring the big elephant in the room.
Increasing market share
First, the good news. Over time, clients of Binck will be closing their positions on Euronext and every new position will be traded on TOM. This will result in some five percent more market share for TOM. In addition, some new brokers will be connected soon. The shareholder ABN AMRO will connect in a few months, and also Interactive Brokers will probably join in (including Lynx). Their market maker Timber Hill recently signed up as liquidity provider. With these new brokers, the rival exchange Euronext will be overtaken in market share. Last week’s market share was 33% for the index options and 26% for the stock options (link – pdf)
Don’t mention the Germans
The bad news. Euronext and TOM have agreed to ignore the German exchange Eurex – it will make their market shares looking better with leaving the third exchange out of the equation. Dutch options can be traded on the Eurex for nearly a decade.
The flow traded on Eurex is often bigger than TOM. Checked a few stocks for last week’s turn over.
It’s obvious Euronext is still the biggest exchange in the stock options on Dutch large caps. In ING and Royal Dutch Shell it’s doing 65% of the total market. However, in options on Arcelor Mittal, most of the flow is executed outside of Euronext. TOM is reporting a market share of 29% in Mittal options, overstating the true market share with 10 percentage points.
With Eurex doing comparable or even more volume than TOM, this brings us to the question whether the clients really do get the best execution. The “TOM Smart Execution” which would compare prices faster “than the blink of an eye” between markets apparently only works for two markets. If TOM’s mission is serious about giving the best execution for clients – they have no choice but to add Eurex.
Finally, it’s about time to cut the fees for retail option trading, almost 3 euro’s doesn’t make sense. With Lynx buying Todays, there may be renewed price competition.
On more thing. For those who don’t use twitter, possible to stay tuned for updates via Facebook as well. Will be bringing an interesting scoop in a few weeks.
Update
Thanks to @exTweets, a more in depth analysis of the market share in Dutch single stock options by TAGaudit, in Best Execution – Spring 2013. Page 86.
Good article. Very informative. 😉
Some personal notes:
– It’s good news that new brokers will be connected. This was the only possibility for TOM to grow. Especially Interactive brokers (with Lynx and todays brokers) has the ability to push the market share above 50% for TOM.
– It’s unfortunate that clients of Binck don’t have the choice to choose which exchange they prefer to trade. But if every trade is forced to trade on TOM, what about to following situation. Market makers on euronext and TOM show a bid-ask price of 1.5 – 1.55. A retail trader wants to sell for 1.53 on euronext, but the MM are not interested in this price. At the same time another retail trader on TOM (with Binck as broker) wants to buy this. Because the best bid-ask spread is now 1.5 – 1.53. the MM on TOM are obliged to take my buy-order and sell at 1.53 and immediately buy it back at Euronext, resulting in a small los due to transaction cost?
– It is shameful that TOM doesn’t include Eurex volume when comparing their market share…
– I don’t think that a merger between Lynx and Todays will result in lower prices. This means less competition, so no need to reduce prices and cut profits.
How much of the Eurex volume is on-screen, and how much is prof trades? It always used to be mostly the latter.
je vergelijking gaat inderdaad mank, Jack
op Eurex gaat 90% van het volume via proftrades
don’t use twitter or facebook, big time pass, and thus big pass, use linkedin at most, that reminds me to buy more linkedin stock
‘MM on TOM are obliged to take my buy-order and sell at 1.53 and immediately buy it back at Euronext, resulting in a small los due to transaction cost?’
not sure of exact rules, but let me take a guess, while MM might be obliged to sell at 1.53 on TOM, he is not obliged to buy the 1.53 on Euronext. That’s the whole idea of diming/quote matching, not hedging immediately, but trying to be aggressive on bids ahead of other mm once you are short, see if you can capture spread
Well, I can specify that the market shares up until July 2013 are
73% Euronext, 15% Eurex and 12%TOM. This is with respect to total listings.
In terms of screen trading, the majority (60-70%) is traded in the order book. Penny ticks for all premium levels support tighter spreads and order execution between bid and offer.
So much for the marketing
when you say 60-70% is traded in the order book, are you referring to prof trades over phone?
also what do you mean by ‘so much for the marketing’, sorry bit new to this evolving market structure
Prof trades over the phone make between 30 and 40% of the Eurex volume in Dutch names. The majority is traded on screen.
Thx for the mention
That doesn’t necessarily mean it’s all real volume. Dividend crosses on Eurex also always went through the screen.
There isn’t much dividend crossing in Dutch stocks on Eurex – not much retail involved. Also – this hasn’t occurred yet on TOM as there was no real open interest early this year.
what is dividend crossing?
3 hints:
ex-dividend
early exercise
open interest
ohk, so how many of early exercise misses on long call before ex-divided are assigned to short party?
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