Facing MiFID with the most efficient marketplace

The Markets in Financial Instruments Directive (MiFID), which was implemented on 1 November 2007, opens competition by introducing a level playing-field between all execution venues in the European Union and reconfigures the trading value chain across intermediaries, brokers, data vendors and investors. NYSE Euronext: ahead on MiFID NYSE Euronext has been built on the same principles that the Markets in Financial Instruments Directive (MIFID) aims to introduce: Euronext's main objective is to create a single market in financial services within the European Union and to provide the marketplace and investors with a higher and more consistent level of transparency whilst ensuring a high quality of execution. NYSE Euronext: your preferred business partner Our model has allowed us to build the most liquid marketplace in Europe enabling investors to further develop their domestic as well as their cross-border business in a highly cost-efficient way and ensuring very high market quality, benefiting both issuers and investors. NYSE Euronext offers investors trading in a large range of products via a single state-of-the-art trading platform. It is NYSE Euronext's mission to remain a major provider for the European securities industry and to offer new and innovative business solutions to its clients. NYSE Euronext's strengths as a partner in MiFID:    Single market A single open European market Transparency A regulated and transparent environment Execution Enhanced quality of execution Liquidity The most liquid marketplace in Europe Market quality The market quality to facilitate best execution Leading Technology State-of-the-art electronic trading platform NYSE Euronext solutions New innovative business solutions

How effective has MiFID been at achieving this goal?

NYSE Euronext has created the first trans-national exchange in Europe by successfully integrating four separate cash marketplaces on an open federal basis, attracting a large number of Europe's blue-chip companies.

Horizontal integration with vertical efficiency
NYSE Euronext has an integrated and open market model architecture to provide clients with cost-efficient and flexible trading facilities, enabling them to benefit from NYSE Euronext's Straight-Through Processing (STP) service, from order routing to clearing and settlement.

Cross-border harmonisation
Our pan-European model has initiated harmonisation across the NYSE Euronext countries with the introduction of a harmonised European Rule Book. This has reduced the compliance burden of our clients considerably, ultimately reducing execution costs. The harmonisation of rules and procedures was facilitated by a process of close co-operation between NYSE Euronext and the regulators of the financial markets in each of the EU states where it operates: the AFM (The Netherlands), AMF (France), CBFA (Belgium), CMVM (Portugal) and the FSA (United Kingdom).

Reducing costs for cross-border trading
Over the years, NYSE Euronext has passed on the synergies of its single market to its clients, with fee reductions of up to 30% on average. As its model develops further, Euronext has also introduced a common scaled fee structure for all markets, stimulating the growth of trading volumes. The NYSE Euronext model creates a truly single orderbook encouraging further cross-border trading in Europe.

 

A fair and orderly market.
As a regulated market, NYSE Euronext operates a fair and orderly market. The real-time monitoring performed by NYSE Euronext Cash Market Operations and Customer Technical Support is formally enforced with respect to our trading rules and procedures, which are approved by our five regulators. This regulatory and organisational system gives NYSE Euronext the power to efficiently manage crisis situations or extraordinary circumstances. On a day-to-day basis, NYSE Euronext manages listing, trading, corporate events, data dissemination and reporting activities.

A transparent market for all market players.
NYSE Euronext provides full transparency to the market by offering a full real-time pre-trade and trade reporting market data feed through the data vendors. This allows investors to have equal access to the same information and to gain visibility on the depth of the orderbook and best execution. NYSE Euronext is already compliant with the MiFID transparency requirements and will be able to help its clients with this new challenge introduced by the Directive.

 

NYSE Euronext has developed a highly sophisticated market model adapted to all asset classes and facilitating the different trading strategies of different types of investors. A wide range of order types is on offer at NYSE Euronext, from limit orders, stop limit orders, stop loss orders, market orders, iceberg orders, minimum quantity and block trades to VWAP trades. NYSE Euronext benefits from a world-renowned execution system and one of the longest track records in this domain.

Quality of execution has been further improved by Liquidity Provider schemes, which ensure a permanent flow of liquidity and optimum trading conditions for all markets, and especially in products/stocks lacking natural liquidity NYSE Euronext ensures developmentthose efficient liquidity scheme in all MTFs programme such as NYSE Arca Europe or SmartPool.

As the leading European stock exchange, NYSE Euronext plays a unique role in providing deep and liquid markets for all categories and sizes of market participants. The NYSE Euronext market model has encouraged the diversification of trading strategies (including algorithmic trading and proprietary trading) in the Euronext orderbook, attracting a large variety of order flows including retail, institutional, proprietary trading and hedge funds.

NYSE Euronext has become the leading European market with a market share of more than 28% in terms of number of equity transactions and 23% in term of turnover. (source FESE - April 2009)

Over the years, the Euronext federal model has also favoured the development of cross-border order flow, which now represents around 23% of our total equity activity, compared to 8% in 2002.

Euronext has attracted a large number of blue-chip companies (43 companies from the FTSEurofirst 80, 25 companies from Dow Jones Euro STOXX) giving investors access to a market capitalisation of €2,600 billions.

The development of this large pool of liquidity offers our clients guaranteed execution against the lowest possible price.

Thanks to the diversity of our client base and the large range of their trading strategies, NYSE Euronext offers real anonymity of trading and huge trading potential. With an average weighted bid and ask spread at the best limit of 9,7 basis point during April on the Euronext 100 component stocks, NYSE Euronext creates the cheapest condition for executing orders.

In the competitive execution world of today, NYSE Euronext is a trading venue of choice that ensures platforms with the best possible execution conditions more frequently than any other platform. For example during April on the Euronext 100 component stocks we offer on average 58% of the time, the best European prices (Source Transaction Auditing Group) and 32% of the time the best bid, the best ask and the greatest quantity simultaneously.

Integrating technology after a major merger is a significant challenge, and one that has confronted the majority of international exchanges in recent times. Developing one platform that is sufficiently versatile to suit a major exchange’s global needs is an audacious plan. This ambitious strategy is now coming to fruition for NYSE Euronext, with the December 2008 rollout of the Universal Trading Platform (UTP) on the European bond market. The migration was extended to equities and ETFs in February 2009, and customers have responded very positively to the new system so far.

The UTP integrates best-in-class technologies from NYSE Euronext’s existing trading engines and networks into a single, ultra-fast, high-capacity, ultra-reliable trading system. The system’s promised ultra-low latency has been confirmed since rollout with sub-millisecond roundtrip speeds up to ten times better than previous latency levels for customers connected via the Common Customer Gateway.

The Universal Trading Platform will replace all of NYSE Euronext’s current trading systems worldwide, for all venues and both cash and derivatives markets. The phase-in that began on European cash markets will be extended in Q3 2009 to NYSE Arca Equities and Options markets in the US, and to NYSE Liffe and the North American markets beginning in Q4 2009 – successfully implementing a revolutionary new industry standard in record time.

The NYSE Euronext offers new innovative services that respond to the evolving needs of the market.

Based on client consultation, NYSE Euronext has prepared new services to continue offering the most cost-efficient trading services to its clients:

- NYSE Euronext welcomes 2 new venues fully supported by the UTP and immediately accessible to existing customers:

NYSE Arca Europe: A new MTF extending trading on all Europe’s most liquid stocks with just one connection., It is easy to access, ultra- fast and available at a competitive price

SmartPool: A new dark pool dedicated for block trading on the main liquid European stocks

In a challenging economic environment, NYSE Euronext sees this unhampered connectivity as a major selling point for customers, creating cost synergies and increasing business opportunities without complex technological hurdles.

- NYSE Euronext has enhanced its regulated markets with new features:

Internal Matching System (IMS): A service based on new innovative algorithmic optimising matching facilities our clients in the orderbook, who benefit from NYSE Euronext's deep pool of liquidity while reducing costs considerably throughout the whole value chain.

Trade publication and transaction reporting service: A one-stop shop publication service for all European securities allowing transactions to be published and reported to the relevant competent authority. This service is completely in line with the MiFID transparency rules.

Broker volume: New statistic tool coming soon.