Philippe Carré, global head of connectivity, SunGard’s capital markets business offers his view on the recent news that NASDAQ OMX is investing in TOM MTF and explores what this means to the European trading landscape
The news that NASDAQ OMX is investing into Dutch alternative venue TOM MTF proves once again how much the European trading landscape has changed recently, with the focus increasingly shifting from equities to derivatives, given the paucity of trading volumes in equities and unsustainability of a lot of the venues that appeared on the scene after MiFID.
TOM MTF, short for The Order Machine, counts the largest Dutch institutions as shareholders (Optiver, Binck Bank, ABN, IMC) and has been working largely under the radar for a little while, first launching an equities MTF with a lit order book specialized on Dutch stock. Then followed, after a long and protracted battle; the launch of the relatively novel idea of a competing MTF listing and trading single stock equity options on Dutch stocks, which put in direct competition with NYSE Liffe Europe’s Amsterdam business.
With strong backing in the Dutch financial community and a market quite used to trading derivatives, TOM MTF is one of the very few trading venues to have chosen derivatives as their main focus, introducing competition in an area typically considered a duopoly in Europe between NYSE Liffe Europe and EUREX. With a market share around 15% in equities options for a trading platform launched little more than a year ago and with the usual difficulties with regards to clearing and settlement that have affected other alternative venues in Europe, such as Turquoise Derivatives, they are today one of the few credible derivatives alternative market – albeit operating on a small niche.
NASDAQ seems determined to get back into the thick of it in Europe, after the unfortunate experience of NASDAQ OMX Europe (remember them?), one of the first pan-European MTFs which failed to garner enough traction against Chi-X, Turquoise and BATS, and ultimately closed a few years’ back. The combined launch of NASDAQ NLX, competing in the rates business with the exchanges mentioned above, and now with the possibility to spread the battle to the listed equity options world through the TOM MTF “franchise” is definitely an interesting combination, showing the strength of the trading platform operator.
Interestingly, NASDAQ OMX through the TOM MTF investment has also acquired the opportunity to go back to equities trading competition, as the Nordics equities landscape increasingly fragments, no longer being a “chasse gardée.” We may be closer to seeing Europe finally turning into a single market, no longer a series of individual markets linked through technology. It may also be that we will see new life breathed into some of the market consolidation brutally curtailed by the successive failures of the LSE/TMX and Deutsche Boerse/NYSE Liffe Europe tie-ups.
Many of the current alternative venues are not viable, and the larger operators need to prove to their shareholders they have a strategy, and one that works: diversifying, buying market share or integrating new ideas could very well be the way forward.
