Pages: 18
Publication date: 24 February 2024
Authors: Paul Besson, Head of Quantitative Research & Anatole Casimir, Quant Research Analyst
In this Quant Research report, we look at implicit latency costs of London-based Dark MTFs for trades on stocks listed on Euronext, whose data centre is located in Italy.
Did you know you are paying a latency tax?
The matching engines of continental Primary Markets are located in Europe, hundreds of kilometres away from London-based Dark MTFs.
It takes 7-8 milliseconds for MTFs to import Euronext Mid-Point prices from Euronext’s Data Centre in Bergamo to London.
31% of Dark trade prices on MTFs are stale on Euronext-listed stocks, and the Opportunity Cost per stale Dark trade amounts to 1.0 tick and 2.3 bps. The overall expected Implicit Latency Cost for a passive Dark trade therefore amounts up to 0.69 bp for a participant unable to benefit from favourable stale trades.
How can you avoid it?
We encourage Sell-Side and Buy-Side institutions to conduct bespoke estimates on their proportion of stale Dark trades, and on their Implicit Latency Costs.
Nevertheless, Euronext’s new Dark trading functionality - Euronext Mid-Point Match - will have no latency; therefore, its total trading cost will amount to only 0.3 bp, as no participants will be exposed to Latency Costs.
For more information and to receive a copy of the report, contact QuantReports@euronext.com
To connect to Euronext Mid-Point Match, contact EquitiesTeam@euronext.com and check out our webpage.