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Fresh play-offs at the old exchange

24 comments / November 30, 2011

Great, it’s time for the annual play-off for market maker licenses. The auction for primary market maker (pmm) licenses was held two months ago. The contestants had a month for learning the tricks of the trade. From December 1st they will start for real. Tight markets in scores of option classes. The market maker with the tightest spreads for the biggest size will win the game. Quoting all series until the next auction in November 2012. In my crystal ball I see a different world in the end of 2012. With more attractive flow at TOM, the market maker auction end of 2012 will be different. But not yet.

Configure the trading systems to quote as tight as possible, without giving away too much free cookies. Quoting tight is nice, but serving a free lunch could be a bit costly. There are eleven play offs. More than usual. Euronext decided to do it all in one batch. Here is an overview of the battlefield :

Option Class

Market Makers competing
Aegon (AGN)  IMC, Tibra, Nino
DSM  IMC, Scrocca
ING  IMC, Nino
KPN  Caerus, IMC
Mittal (MT)  Caerus, IMC
Philips (PHI)  Caerus, IMC, 323
Post NL (PNL)  All Options, IMC
Royal Dutch (RD)  Caerus, Tibra
Randstad (RND)  IMC, Scrocca
TNT Express (TNE)  All Options, IMC
Tom Tom (TTM)  All Options, 323
Unilever (UN)  Caerus, IMC

We do miss some usual suspects. Optiver is not in the list. In this case it means they secured their territory properly, and performed well last year. You can stay Primary Market Maker as long as you wish, as long as you fulfill your quoting obligations. IMC apparently did not, they are on the defense against Caerus and in lesser extent Nino, 323 and Scrocca. The final score of the game will be published in February 2012.

The full list of market makers and their roles can still be found here (pdf).

 

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Trading fees at TOM

39 comments / November 25, 2011


There it is. Tom announced their trading fees for market makers and retail flow. It’s cheaper in Sweden. But not that much. Note the market maker fees will probably be a little lower when acting as liquidity provider. The current rate for liquidity providers at Euronext is 5 cent. No information yet on the fees for Holland Clearing House.

Most eye catching are the free fall in prices charged to brokers. They have been paying outrageous prices for years. Question remains whether retail investors will benefit from this. They should. Lower broker fees will attract more financial institutions to connect. This is the main competitive battlefield.

A market without liquidity in terms of size and depth is useless. Therefore market makers will be lured by lower fees. All of ‘m will pay 4 cent per option, compared with 5 at Euronext. That’s not a sensational price cut, but it’s reasonable TOM will charge less to quoting liquidity providers. Hence the statement 4 cent is the maximum fee.

Euronext raised the price for non-quoting market makers, but TOM doesn’t see the point bullying the small ones. The Premium Based Tick Size fees used to be 4 cent and will be raised to 5 cent per December 1 (these are the cheap far out of the money options).

Maximum fees per order.

One more thing. Euronext raised the maximum fee for (prof) transactions to 200 euro in stock options and 500 euro for index options (and uncapped for index options traded through the screens). Up from 40 euro, that isn’t pocket money.  TOM decided to set their maximum fee per order at 40 euro. They must have been pleasantly surprised by the new Euronext prices.

  • More details on the TOM fees here (pdf)
  • Details on the new Euronext fees here (pdf)
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Who’s who in the 1%

21 comments / November 6, 2011

It’s november again, time for the MOvember (grow a mo, save a bro) and of course a brand new edition of the Quote 500 rich list in the Netherlands. For details on 486 filthy rich you’d better buy a copy of your own, I’ll focus on the wealthy 14 who made their fortune in trading. Of course, it’s a matter of taste to classify them as smart traders or just early investors.

The lower limit in the Quote 500 is 55 million this year (number 500: Dennis Bergkamp). There are scores of traders who classify as in-the-money, but have a long way to go to reach this list.

491. Rene Schelvis (IMC) 56mio +7,7% (2010 nr499). Sold his 30% stake in IMC in 2007 to Wiet Pot. Love his Lamborghini.

445 Roger Hodenius (Flow Traders/Optiver) 65mio +8,3% (2010 nr446). Founded Flow Traders in 2004 together with Han Jan van Kuijk.

399 Jan van Kuijk (Flow Traders/Newtrade) 75mio +25% (2010 nr449). Researchers from Quote discovered he made a few million as partner in Newtrade, in the open outcry era.

345 Jan Dobber (Optiver) 83mio +3,8% (2010 nr334). Left Optiver a long time ago, but participated with Willem Middelkoop in his Gold mutual fund. Of course, made his fortune in Optiver.

320 Leo van den Berg (Optiver) 90mio +0,0% (2010 nr294). Relatively unknown, 43 years old. Left Optiver after option trading moved to the screens. Retired.

310 Ruud Vlek (Optiver) 96mio +18,5% (2010 nr329). Doing some real estate trading with Kaemingk’s wife. 64 years old.

296 Chris Oomen (Optiver) 100mio +17,6% (2010nr315). Another founder/investor. Rumor has it his net worth is higher. CEO of insurance company DSW, 62 years old.

238 Jurjen en Hugo Kruisinga (Cross Options) 125mio -7,4% (2010nr210). Made a fortune in the open outcry era. 57 and 50 years old, living on a farm in the English countryside. Don’t know we’re talking about the same farm, or two different farms.

198 Adri Strating (TWE) 155mio +19,2% (2010nr215). Formerly known as Adri S. (74). Another generation, no derivative trading here.

149 Allard Jakobs (All Options) 200mio -33,3% (2010nr93). Sold! Haven’t seen the exact figures, but as far as I can see All Options has never been a cash cow, except for the Altana year. Losing millions ever since. As predicted tumbled on the list, but not far enough.

148 Rob Defares (IMC) 200mio +112,8 (2010nr287). IMC is back on track and earning millions. Defares has got a 60% stake in the firm.

125 Wiet Pot (IMC) 240mio +14,3% (2010nr136). Well known story of the former Goldman Sachs partner returning to Amsterdam. After a brief period as CEO of Kempen & Co where he was forced out after ignoring compliance regulations, he bought a 35% stake in IMC. Unknown where the additional 5% came from. Probably from a spreadsheet error at the Quote research desk. He bought 30% stake from Schelvis and an additional 5% from Defares. 54 years old.

110 David Slager (hedgefonds Atticus) 270mio 0,0% (2010nr105). Hedge fund manager, apparently has got a Dutch passport too.

98 Johann Kaemingk (Optiver)300mio +27,1% (2010nr121). Of course the true founder of Optiver, 53 years old. Not the playboy kind of person to say the least. Spending a lot of time and money on the church and related charity.

Last year’s victims were Hans Kroon and his buddy Richard den Drijver. They didn’t make a magical comeback. We have two more exits this year. But in contrast to Kroon and Den Drijver, these men still have a reputation.

– Jan Kluft (Delta) 2010 nr 480 54mio, estimated at 51-55 mio. Not enough for this year’s edition.

– Ronnie van de Putte (Curvalue/Bever) 2010 nr 434 61mio, estimated at 46-50 mio. Never really heard of this guy. Doing real estate stuff as far as I can see.

Update, after questions in the comments

The chief research for the Quote 500 has been a market maker himself in the pit. He knows the guys for a long time, and knows what he is talking about. Ronald van der Geest has sold his take in Flow Traders for a good price to the American investors (Summit). A lot of money, but not enough cash to reach the Quote 500 list. The estimated net worth of both Flow partners in the list is based on the value of their firm.

Allard Jakobs on the other hand, had a lot of cash in his private holding. He lost money last year, guessed at 40 million. If that covers it will be clear in a few months when the new chamber of commerce files are available.

At IMC Wiet Pot has bought 5% from Defares. Rumor has it he may be willing to buy some more.

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Euronext telling fairy tales

11 comments / October 31, 2011

Just a little more than a week ago Euronext Liffe presented the outcome of the selection process of liquidity providers. This website even presented a wonderful graph with all firms and their number of roles. Also brought the news of the end of some classes of weekly stock options.

Well, turns out not all this information has been correct. Euronext made a couple of mistakes, forgetting market makers in weekly options and messing up the ING/INO liquidity provider (regular and old ING options go combined, usually).

Here’s the official explanation by Euronext Liffe:

“Due to reviewed calculations related to Member’s track record on which decisions have been based certain results have been updated.” (pdf)

Sorry, that smells like bullshit. Calculations have nothing to do with it. The overstaffed exchange has forgotten all market makers in certain classes (weekly KPN and PHI). Don’t worry about mistakes (we’re used to it), but take it like man and admit it. Maybe regular press (FD) will buy it, but traders don’t believe in fairy tales.

Raising fees

Small market makers such as GDT and Klinkenberg (yes FD, that’s how to spell their name) are outrageous after Euronext announced to double the fees of non-quoting traders. They have a point. Small traders can’t always take on responsibility for quoting, but they do add liquidity in some cases. With the current tight spreads, their fees are unreasonable high.

The other problem is the capped maximum costs of professional block trades. These trades, arranged by brokers between firms, were capped at 50 euro. This has been raised to 200 euro. That’s having a serious impact and there seems to be no economic justification.

The new reality hasn’t dawned yet on Euronext. Market spreads have come down because of competition. With the new contender TOM around the corner, all transaction prices will come down. There will be no possibility of compensating this with raising costs somewhere else. NYSE Euronext is the result of a political delicate multinational merger – with stakeholders protecting jobs everywhere.  Next year we will see massive job cuts at Euronext. The alternative isn’t very attractive : folklore.

(Original PDF with errors here)

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Euronext Liffe cuts some fees

42 comments / October 24, 2011

In a last effort to stay competitive, Euronext Liffe has cut transaction fees for clients and liquidity providers. A textbook example of too little, too late. It’s difficult not to be cynical.

On the other hand, after all these years running a business as a true monopolist it’s a giant leap for Euronext. It’s way too late to stop TOM from launching their derivatives exchange. The cut won’t make a difference, but at least they are doing something. Maybe discount brokers such as mijnbroker.nl will adjust their option fees immediately. What Euronext should have been doing is lowering the fees a lot more agressive for options with low premiums. That would possibly ignite trading in the weekly options or in small out of the money strikes.

Clients will pay 40 cent instead of 75 cent. The clearing fees aren’t included in this price. Liquidity providers with a quoting obligation (pmm and cmm) will pay 5 cent in equity options, down from 7 cents. Index options stay unchanged. This doesn’t mean the total transaction costs at the market makers will be lowered with 29%. First of all, options with premiums under 50 cent were charged 5 cent before. Second, the Central Counterparty Clearing (CCC) needs to be paid as well as the Clearing bank.

New prices will be effective from December 1st.

Update

Didn’t pay enough attention to the details of the press release. As people pointed out, the exchange has been raising prices too. Professional block trades between traders are getting more expensive. Smaller market makers not acting as liquidity provider got hit by the removal of the “preferential class” fee. Their fees will be doubled. You can raise some prices when selling a superior product. Transaction prices are more like a commodity. The quality of Euronext Liffe markets is mediocre at best.

TOM will push forward with low prof trade fees to attract market participants, and hit Euronext where it hurts. Euronext will scramble to cut more prices, and looking for other fields to raise fees – only to discover their former monopolist margins are history in a price war.

Source (pdf)

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