This week sees the launch of another MTF – NYSE Arca Europe. Its claim to fame is that it offers low latency and low fees and that it enables its customers to leverage the existing infrastructure of NYSE Euronext. The devil though, as the say, is in the detail. No one can dispute the low fees (.15 basis point flat fee) but latency is notoriously difficult to compare between venues. Each venue is able to produce various metrics but they all measure latency either between different points of the total workflow, or under different test conditions. The net result is that it’s pretty hard to make any definitive statements about which is the fastest venue.
Latency has become increasingly important as liquidity continues to fragment and because traders want to take advantage of the different pricing structures available at each venue. Ideally, traders should be constantly moving passive and aggressive orders so as to get the best deals from each venue as liquidity ebbs and flows between them. This requires low latency price feeds, SOR technology and matching platforms.
Perhaps it’s another project for the boys back at Fidessa Labs to see if we can come up with an objective way of comparing latency between MTFs and then publish the results on this site.
Arca Europe also has the advantage of backing by a substantial parent – NYSE Euronext. This should enable it to use the existing pipes and connectivity that NYSE Euronext already has in place. On the other hand, some NYSE Euronext customers are still ironing out the final pieces of their upgrades to NYSE’s new UTP infrastructure and so may not be able to make the necessary changes quickly.
This last point seems to me to be the key to attracting liquidity to a new venue – convenience. Latency, trading fees and liquidity are all important but, in a highly competitive environment, it needs to be really simple to connect and access a venue. This applies just as much to exchange sponsored MTFs as to the new independent alternatives.
It seems like the plan at Arca is to adopt a relatively “soft” approach to its launch and so we will be adding the data in a few weeks once volumes have established themselves. In the meantime, we will be keeping everyone updated on its progress.