In January 2009 Equiduct introduced its Orange Liquidity Fragmentation Analytics service (OrangeLFA) to shed light on the increasingly fragmented European equity market. The financial community embraced this new tool that had more than one surprise in store. OrangeLFA, for instance, revealed that the home market of a stock not necessarily always offers the Best Price and that choosing an incumbent exchange does not always guarantee a good price. Although impressed by the results, market participants pointed out that price is not everything and fees are a crucial factor. Equiduct seized this suggestion in the new OrangeLFA release.
âMiFID has been created to give clients the best possible result when trading securities in Europe. Therefore it was only logical to also open the market to MTFs (Multilateral Trading Facilities), thereby stimulating competition between trading venues for the benefit of clients. As a consequence, fees dropped and still are decreasing. Therefore, fees have become an even more important factor when analysing where an execution should have taken place for the benefit of the client. By taking into account the execution fees of each venue, OrangeLFA finally enables all market participants to know pre-trade where they can expect Best Execution,â says Artur Fischer, joint-CEO of Equiduct.
Equiductâs OrangeLFA clearly shows that on the incumbent exchanges, in between 20 % to 51 % of all trades missed Best Execution when taking into account Best Price and execution fees. Nevertheless, to execute trades only on the new trading platforms does not guarantee Best Execution either. They miss the best result for the client in between 20 % to 34 % of all cases.
âThis is an unnecessary monetary lossâ, comments Artur Fischer. âTo profit from decreasing fees and find the Best Price has become really easy now with OrangeLFA showing market participants where they can ultimately find the best deal when trading European equities.â To aid market participants quantify and monitor Best Execution across Europe, Equiduct offers the OrangeLFA in three different versions.