Analysis | Equity Derivatives Markets


Volume and fragmentation


In this issue Ben Calev, Chief Technology Officer of TAG (Transaction Auditing Group, Inc), begins a new research series detailing the growth and fragmentation within the Equity Derivatives Markets.


This first, high-level analysis focuses on single stock options covered by the three main markets, primarily surrounding Dutch derivatives. We will be reviewing market share and trading volume for the first three months of 2013 (see Fig. 1).


Fig 1: Contracts traded (m) Jan-Mar 2013


0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5


0


Jan 2013 Euronext


Feb 2013 Eurex Mar 2013 (w1-3) The Order Machine


Euronext – 73.20% Eurex – 10.62%


The Order Machine – 16.17% Since December 2011, Dutch MTF TOM (The


Order Machine) has been gaining market share, breaking the duopoly on Dutch single stock options formerly held by exchange giants NYSE Euronext (LIFFE) and Eurex. TOM has shown consistent trading growth within the Netherlands options


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market, one of the most established (and second largest) in Europe. With the further investment of capital by exchange operator NASDAQ OMX in late 2012, we can only posit that this trend will continue (see p14, interview with Hans-Ole Jochumsen, NASDAQ OMX). TAG believes that, as Chi-X Europe re-shaped the cash equities market, this is one of the pivotal steps in further market fragmentation. This increased competition looks to reverse what many feel is complacency within the pan- European options markets, compared to continued expansion within the US markets.


Fig 2: Market share (%) January 2013


For the month ending 31st January 2013 (see Fig. 2), we see that NYSE Euronext (LIFFE) has


Best Execution | Spring 2013


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