DeGiro trashes TOM

38 comments / December 10, 2014

Online broker DeGiro surprised everybody today. On national television they came with the news TOM’s smart order router (SOR) doesn’t work very well. In fact, the guaranteed “best execution” proved to be fake. To make things worse, apparently a HFT firm has seen enough time to benefit from the trades.

Research paper

The Dutch pdf can be found here – the Smart Order Router has been tested. English version will arrive today (Update: here). In illiquid stocks with high stock prices (Unibail. Solvay etc) a large order was send to the SOR. Similar to Michael Lewis’ Flash Boys the orders arrived at one exchange, after which the HFT traders were given enough time to trade on the other exchanges.

See pages 8 – 10 for interesting details and Bloomberg screenshots. The SOR managed to lose the best offer in the market on Euronext because it started lifting on TOM and Chi-X. It looks like they lifted the second best offer on Chi-x before lifting the lower offer on Eur0next. HFT firm made a quick buck by selling 113.30 on Chi-X and subsequently lifting 113.25 on Euronext. Does not look good.

Willem Meijer (TOM) loses his cool

TOM and Binck would have a lot of explanation to do, one would assume. I know Willem Meijer as a cool, calm and collected guy. No such thing. Instead of a mea culpa and let’s fix it – they are making a lot of noise. Still in denial.

It accuses DeGiro of market manipulation (seriously?).
“The large orders in illiquid stocks aren’t common so that’s why the SOR doesn’t work” (lol whut?!)
“The screenshots from Bloomberg are delayed with a few seconds.” (doesn’t matter in quiet stocks, does it?)

I would say the examples from DeGiro are exactly situations were the smart routing could prove it works at all. Nobody needs a smart order routing for 1000 shares of ING.

AFM starts investigating

Anyway, the finance watchdog AFM has started an investigation into TOM’s stock routing system. Meanwhile, TOM and Binck should be thankful they’re not living in the United States. Ripping off customers for few years wouldn’t only hurt your reputation in the US.

Statistics

This whole clusterfuck by TOM puts some other statistics in another perspective. In september over 80% of the stock orders have been executed on TOM or Chi-X. Not strange at when you lose all bids and offers on Euronext to the HFT traders. And the average saving per order? Never believed them anyway..

Churning and Burning

4 comments / November 25, 2014

Just ran into this highly entertaining weblog, Churning and Burning. A daytrader at a New York prop firm lost a few bucks in trading some OTC/Pink sheets stocks. Nothing new here, except for the fact he sure knows how to write. The hilarious MS Paint graphics are the icing on the cake.

Although I do know some daytraders who are consistently profitable for many years, daytrading isn’t my game (and “technical analysis”.. ah nevermind). However, I assume everybody in the business has once taken a six figure hit on a bad day (at least, I did). Or sat next to someone who did.

Anyway, with markets slowing down towards christmas it’s a funny read during the day. The guy is not only a comedian, has got some smart things to say.

Hans Pieterse left Optiver

75 comments / November 23, 2014

Didn’t see it coming when the news broke last Wednesday. Edwin van der Kruk, nicknamed Joop – since he looks like television mogul Joop van den Ende, left Optiver last month. Bigger news is Hans Pieterse leaves the firm as well.

Hans Pieterse prominent figure

More recent news is that Hans Pieterse left the building as well. Although Pieterse will still be on the payroll for a few months. Joop did not have a big profile (Quotenet is still searching for him on this image), but Hans Pieterse is well-known within the trading world.

Optiver replacing management

DeGiro “lowers” fees

50 comments / November 2, 2014

Last month Euronext announced to cut fees for option trading for retail investors. In order to match TOM’s transaction fees, the fee was lowered from 40 cents to 31 cent per option. The question is always whether or not the brokers lower the fees to the investors, or are happy to keep the extra profit margin in their pocket.

DeGiro, always keen to capture free publicity with empty promises (Alibaba IPO), announced they would follow suit (link, nl). A drastic cut in the transaction costs, the more you trade the lower the fees. A new low transaction feee of 50 cents per option for the most active traders. Sounds great. This sunday they released their new fee schedule. See below.

Seriously. Other brokers are a lot more expensive, DeGiro doesn’t have an incentive to lower fees. But this new fee schedule is embarrassing. DeGiro seems to have lost touch with reality.

Everyone even getting close to the 10.000 option contracts threshold per month should leave DeGiro and switch to a professional firm (say, Better Options). Suggesting retail investors spending EUR 50k per month on option trading fees. What a joke.

Liquidity providers on Euronext

30 comments / October 30, 2014

October is not only the month of legendary stock market crashes, also time for updates from Euronext on who’s who in the option markets. Here’s the overview of all stock options with the market makers providing liquidity. Some new firms joined, some others left. Won’t surprise you only two new entrants to game.

New entrants

Commerzbank. Quoting as competitive market maker (cmm) in all ten large caps (ING, Unilever, Mittal etc). The proud new owner of a large chunk of Imtech is also CMM in a dozen small stocks. Don’t really understand why a large bank would like to quote Aalbers or Wereldhave. Worth mentioning, not quoting Imtech. No index trading.

Wolverine Trading UK. Similar to Commerzbank all ten target group big caps and a few smaller ones (like again Aalberts, USG, Wolters Kluwer). No index trading either.

Exit

Last year we had to say good bye to a lot of smaller firms. This time even All Options is throwing in the towel as liquidity provider. Used to be active in smaller stocks last year.

Archelon Deutschland. Don’t know whether or not they exist elsewhere in Europe. Have been around for quite a long time.
All Options. Rumors haven’t been good lately, and as of next week they stopped providing liquidity. Understood Allard won’t entirely stop trading, maybe shifting to market taker business model. After all they are still hiring.
M & M Trading. Small shop shut the doors.
The Hague Options. Disappeared from the list. Has always been a one man show probably.
Smart Trading. Similar to the small ones above.
Inhouse Trading. Similar to the small ones above.
Goldman Sachs. Not very similar to the ones above. But not on the list anymore.

Who’s trading what

A few market makers are left providing most of the liquidity.

Susquehanna is in a way the new All Options for Euronext. They quote everything when the rest of the market isn’t interested. The spotlight options, but also stuff like OCI.
Srocca (/Fluhalp) is quoting everything, using their second license in the AEX as cmm. Just a very few options are left out (Arcadis, Nieuwe Steen etc).
Webb is trading with their memberships Caerus II and II. Have left the index and Heineken, don’t know is this is related somehow. According to this source they just switched to T-Bricks. (“One of Amsterdam’s largest financial trading firm’s has appointed Tbricks” – right..)
323 Trading. Is primary market maker everywhere, including the AEX index.
Optiver is active this time with three memberships. They have two entities for the large Dutch stocks, and one for Anheuser-Busch Inbev in Brussels. Not active in smaller stocks.
IMC. Still active as PMM in nearly all stocks, including the index.
Nino (Kemp) is active in half of the stocks, but not in the index.
Liquid, Maven, Leopark, Market Wizards, Tibra, Cebulon and Better are only active in the index.

Here’s the pdf with the entire overview. While you’re at it, compare it with last year’s edition (here).

More

Blast from the past. Volkswagen and the mother of all short squeezes. This blog Priceonomics has reconstructed all events back in 2008. The squeeze has caused some post traumatic stress for dozens of options traders. (Via daskapital.nl)

Hong Kong based Algorithmic Trading Group (ATG) has finally become a member of Euronext, Tom Voute will open the market Friday the 31st. Search here for the video.

Amsterdamtrader