What is Best of Book and how does it work?
Roland Prevot, Head of Retail Cash Equity at Euronext, explains what is Best of Book, how does it work and the advantages for retail investors.
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What is Best of Book?
Best of Book (BoB) is a functionality Euronext launched to improve the trading conditions for retail investors.
With Best of Book, when the investor trades on the exchange, he will benefit from a better price, but also from an additional number of shares, compared to those available to professionals.
In short - explains Roland Prevot - Best of Book will guarantee the best execution to retail investors when they trade on Euronext.
What is best execution?
Best execution is a concept implemented by regulators to oblige retail brokers to execute their clients’ orders on the trading venue which is the most favourable for the investor.
To do so, the broker needs to consider two elements:
1 - The trading price at which the order will be executed.
2 - The cost that the broker will have to pay to provide execution.
For instance, for a buy order, the best execution will be the trading venue where the combination “price + cost” is the lowest.
How does Best of Book work?
To build Best of Book, we mandated liquidity providers to provide prices at the European Best Bid and Offer (the EBBO) on Euronext’s Central Order Book and those prices will be exclusively for the orders initiated by retail investors.
When the investor places an order on Euronext, he will have access to the pool of liquidity available to all professionals, plus an additional pool of liquidity reserved only for retail investors.
Thanks to Best of Book, we assessed that the execution price for retail investors will be improved by around €1.6 on average (€3 on average in 2021).
How can I benefit from Best of Book?
First, to benefit from Best of Book, you need to trade on Euronext.
Unfortunately, all retail brokers do not guarantee to execute their clients’ order on the exchange – sometimes they do so on alternative trading venues.
So the first step before opening an account with a broker - suggests Roland Prevot - is to make sure that the broker is directly or indirectly connected to Euronext to deliver the best execution via Best of Book.