NYSE Euronext will offer a new service for European retail investors as it struggles to regain market share lost to alternative trading systems.
The Retail Matching Facility will begin in mid-January, according to an e-mailed statement from the New York-based company today. So-called Retail Liquidity Providers will deliver buy and sell quotes for retail investors, NYSE Euronext said.
If the Retail Liquidity Providers’ quotes are not competitively placed then investors’ orders will trade with NYSE Euronext’s central order book, according to the statement. All transactions will be identified appropriately and quotes from RLPs will be broadcast.
“The aim of NYSE Euronext’s Retail Matching Facility is to promote a more competitive, transparent environment for retail investors than they currently achieve through bilateral, internal arrangements with intermediaries,” Alicia Suminski, head of market and product development, European equity cash and derivatives, said in the statement.
NYSE Euronext started a U.S. pilot program aimed at attracting retail investors in August. It allows exchanges to compete with wholesalers or securities firms that execute orders for individual investors sent from retail brokers. Executions through the retail liquidity program must occur at least a 10th of 1 cent better than the best price at which other market participants can trade.
Brokers supplying orders for U.S. retail clients on NYSE include high-frequency firms Hudson River Trading LLC, Getco LLC, RGM Advisors LLC, Tradebot Systems Inc. and two units of Virtu Financial LLC, according to NYSE Euronext.
In the U.S., most orders from individual investors who trade through retail brokers are sent to wholesalers such as Knight Capital Group Inc. and Citadel LLC, who pay the brokers for sending them. The wholesalers can then execute the orders internally, instead of going to an exchange, as long as they provide prices that match or improve upon levels in the public markets. Orders from individual investors are attractive because the senders, unlike professional traders, aren’t expected to know more about short-term price movements than the firm on the other side of the trade.
The news of the European platform was reported earlier today by the Financial Times.