Using a new trading algorithm, buy and sell orders originated by the same member firm subscribing to this service will be executed at the best price in Euronext’s central orderbook, with no obligation for the member firm to become a Systematic Internaliser** . Such orders may be settled directly by the originating member firm, thus eliminating the cost of clearing and settlement which can represent up to 40% of total transaction costs.
Euronext will thus enable clients to execute orders on the most liquid and efficient market and benefit from leading-edge technology within a regulatory framework meeting MiFID requirements, while at the same time offering scope for significant savings in overall execution costs.
Euronext is also developing a service of transaction cost analysis for member firms and investors, allowing them to verify best execution.
2. Publication of trading data for all European stocks and ETFs
Under MiFID, investment firms will have to meet requirements regarding post-trade transparency, notably by publishing all their off-orderbook trades in real-time to the market. Using its existing infrastructure, Euronext will offer real-time dissemination of data on off-orderbook trades in European equities and ETFs listed on regulated markets in general. In addition, for off-orderbook trades in securities listed on its own markets, Euronext will continue to offer users the choice of clearing through LCH.Clearnet.
3. Transaction reporting to the competent Euronext regulators
Investment firms will also be required to report all transactions to the competent regulators. Euronext will offer a service to enable them to meet this obligation for all securities listed on Euronext markets, as well as for other European equities and ETFs listed on regulated markets.
Euronext: a MiFID-compliant marketplace in line with best execution principles before the implementation of the Directive
In this changing regulatory environment, Euronext already offers clients an assurance of best execution with market conditions that effectively meet all the criteria set out in the Directive.
• Consistently enhanced liquidity of Euronext regulated markets, holding on to the number-one position in Europe in terms of both the number and value of shares traded through its central order book for the sixth year running.
• Minimal volatility and a steady flow of execution: the liquidity of the central order book means that average intraday variation in the price of shares traded on Euronext regulated markets does not exceed 0.11%***. Euronext is thus highly attractive for both market participants and European issuers seeking a combination of liquidity and low volatility.
• The efficiency of the Euronext model is reflected in the fact that bid/ask spreads have never been narrower, generally representing no more than a single trading tick for all liquid securities traded on Euronext markets.
• Execution probability maximized: 96% of orders for the most liquid securities are executed in the order book immediately at the best price, thus reducing costs associated with price discovery and minimizing the risk of non-execution. The Euronext central order book is one of the fastest-moving in the world: best limits are updated every seven seconds for the most liquid stocks, and depth in terms of quantities asked and offered is ten times that of an average trade.
• Steady decline in average execution cost: from 2001 to 2005, the average cost of a trade on Euronext fell by 30% as a result of synergies achieved through a common trading platform and common trading tools.
The quality of execution also relies on the state-of-the-art technology built into the NSC trading platform. It offers clients a range of functionalities as well as unrivalled speed of execution. With functionalities currently available through NSC, Euronext clients can already choose from both a variety of order types to implement different strategies and a variety of market models, ensuring the flexibility needed to adapt to the new competitive environment resulting from MiFID. The integration of the new trading algorithm will enable them to optimize order execution.
At the same time, order-processing and data-dissemination capacities more than doubled in 2006, cutting response times by more than 50%. Migration to Linux-IBM technology in early 2007 will significantly enhance the speed and flexibility of the system, making NSC one of the world's fastest and most efficient trading platforms.
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(*) This project is subject to the approval of the College of Euronext Regulators.
(**) Systematic Internaliser means an investment firm which, on an organised, frequent and systematic basis, deals on own account by executing client orders outside a regulated market or an MTF.
(***) Monthly average of the maximum price variation computed over a period of 5 minutes.
