Equity Trading - September 2023

29/09/2023 - 17:19PM CEST

On 27 March 2023, Borsa Italiana equity markets migrated onto Euronext Optiq^® platform. What can we observe 6 months later?
Take a look at this newsletter and our latest equity trading market quality report to discover how market quality has recently improved on Euronext Milan compared to the main MTFs.

Simon Gallagher

Download equity trading market quality report

Highlights

Price formation
Euronext now sets the best prices on Milan most liquid stocks 74.5% of the time, +24.9 percentage points higher than before the Optiq migration.
In comparison, each of the main MTFs has instead EBBO Setting below 13%.
Market quality metrics
Euronext Milan offers the tightest spread at touch (<3.7bps), the largest liquidity at touch (8,000 shares around the BBO) and the highest Exclusive Time Presence at EBBO (68%) compared to the Central Limit Order Book of Cboe, Aquis and Turquoise.
Aggressive trades
When considering all trades from Equiduct APEX, retail gross trade prices on Italian stocks for Equiduct are worse by 1.60bps compared to Euronext Milan.
The net improvement of Equiduct prices compared to Borsa Italiana is negative also when taking explicit trading fees into account.
Share of Lit trading
Borsa Italiana now captures a record high 80.5% of lit continuous and auction turnover for Milan-listed stocks.
It is +4.7 percentage points higher compared to March 2023 pre-Optiq.

		Euronext Milan	Cboe	Aquis	Turquoise
EBBO Setting (%)	Before Optiq	49.6%	18.5%	29.2%	2.7%
	September 2023	74.5%	12.3%	11.6%	1.7%
	Variation	+24.9%	-6.2%	-17.6%	-1.0%
	MTF vs Euronext	--	6.1x worse	6.4x worse	44.9x worse
Spread at Touch (bps)	Before Optiq	4.8 bps	5.4 bps	5.5 bps	17.5 bps
	September 2023	3.7 bps	4.2 bps	5.2 bps	11.2 bps
	Variation	-1.1 bps	-1.2 bps	-0.3 bps	-6.3 bps
	MTF vs Euronext	--	0.5 bps worse	1.5 bps worse	7.5 bps worse
Liquidity at Touch (n. shares)	Before Optiq	7,188	1,883	3,328	1,215
	September 2023	8,229	2,109	2,290	859
	Variation	+1,041	+226	-1,038	-356
	MTF vs Euronext	--	3.9x worse	3.6x worse	9.6x worse
EBBO Exclusive Time Presence (%)	Before Optiq	36.5%	33.4%	33.6%	4.2%
	September 2023	68.0%	27.8%	5.7%	2.9%
	Variation	+31.5%	-5.5%	-27.8%	-1.3%
	MTF vs Euronext	--	2.4x worse	11.8x worse	23.5x worse

Euronext is the venue for price formation also in Milan

Since the migration of Borsa Italiana equity markets onto Optiq^® on 27 March 2023, Euronext Milan has experienced a striking improvement up to 74.5% EBBO Setting – while the MTFs now set the best EBBO less than 13% of the time.

How often do venues set the best prices on Milan-listed stocks

_{Data source: BMLL Technologies}

Borsa Italiana is further improving its market quality

Euronext Milan offers the tightest spreads on Italian blue-chip stocks, compared to the Central Limit Order Book of Cboe, Aquis and Turquoise:

Volume weighted average spread at touch bps

_{Note: Turquoise Europe not displayed in the chart because spread is much higher (15bps Year-to-Date)}

Euronext Milan offers Liquidity around the BBO (in number of shares) which is 4-9x higher compared to the Central Limit Order Book of the main MTFs:
Since the Optiq migration, the Exclusive Time Presence at EBBO has increased sharply for Euronext Milan – up to 68% i.e. 2-10x better than largest MTFs.

Venues display the best prices on Milan-listed stocks

_{Data source: BMLL Technologies}

Comparing Borsa Italiana and Equiduct APEX executions

A research study was published to analyse the performance of aggressive executions on Italian stocks, by comparing Lit trades on Borsa Italiana with the Equiduct MTF.

When considering all trades from Equiduct APEX, retail gross trade prices on Italian stocks on Equiduct are 1.60 bps worse than prices on Euronext Milan.
Also considering trades below €50k and the impact of explicit trading fees, Equiduct APEX net improvement versus Euronext Milan is still negative. A set-up with Euronext Clearing (CC&G) is required.

Who is driving improvements of Euronext Milan?

The contribution of (a) strong presence of local brokers attracting retail and institutional flow, (b) global banks ramping up their activity in Milan, and (c) market makers fulfilling the strong requirements of the SLP (Supplemental Liquidity Provider) scheme which was implemented on 27 March 2023 for FTSE MIB stocks.
Such multilateral interaction of flow resulted in record high Lit share of trading (continuous & auctions) for Euronext Milan, now at 80.5%.

	Euronext Milan	Cboe Europe	Aquis Europe	Turquoise Europe	Equiduct
Jan-2023	75.8%	15.1%	6.6%	2.0%	0.6%
Feb-2023	77.1%	14.2%	6.2%	1.9%	0.6%
Mar-2023	75.8%	15.8%	5.8%	2.1%	0.5%
Apr-2023	77.7%	14.3%	5.6%	1.9%	0.6%
May-2023	77.3%	15.9%	4.7%	1.8%	0.4%
Jun-2023	78.3%	15.1%	4.3%	1.8%	0.5%
Jul-2023	78.3%	15.2%	4.0%	1.9%	0.6%
Aug-2023	79.6%	14.6%	3.6%	1.7%	0.5%
Sep-2023	80.5%	14.0%	3.4%	1.6%	0.6%
Variation Sept vs March (pre Optiq)	*+4.7%*	*-1.8%*	*-2.4%*	*-0.5%*	+0.1%

_{Data source: BMLL Technologies}

The Euronext Equities team at events

Euronext Sustainability Week

Webinar - Sustainable Trading: How ESG is getting closer to trading desks

ESG (Environmental, Social and Governance) is becoming an increasingly significant aspect of the decision-making framework for all financial firms. It’s not just about making more sustainable investment choices; sustainability requires all participants in the investment supply chain, from brokers to technology providers, to address sustainability challenges and champion ESG best practice within and across their own operations.

Listen to Chris Topple, CEO of Euronext London and Head of Global Sales and Duncan Higgins, CEO of Sustainable Trading, discussing ESG insights and best practices within financial markets.

More Euronext Sustainability Week

International Trader Forum

5-8 September, Barcelona

This year again, we were thrilled to engage with global buy-side and sell-side communities during the conferences and our round robin session where Simon Gallagher and Vincent Boquillon presented our newest equity trading initiatives and Paul Besson, Euronext’s latest quantitative research.
We were proud host of the dinner held at the beautiful Can Magí venue, a relaxing moment with 300+ peers.

See you next time in Rome!