Deutsche Börse slashes algo trading fees

Deutsche Börse slashes algo trading fees

Deutsche Börse is following the example of other incumbent exchanges by cutting algorithmic trading fees on its Xetra platform in a bid to fend off competition from rival bourses and alternative trading systems (ATS).

The German exchange says as of September it will introduce a new pricing and discount model in an attempt to boost algorithmic trading on Xetra, which currently accounts for 40% of volumes on the platform.

Under the new model, the Börse will drop the minimum fee of EUR0.60 for executed orders in the Automated Trading Program (ATP) on Xetra. Instead transaction fees - even for small trades - will be based on the value of the executed order.

In addition, instead of the current seven there will be eight discount levels in the future, with discount rates per level increasing from 7% to 7.5%.

As a result, Deutsche Börse says the maximum discount rate on Xetra transaction fees will increase from 49% to 60%.

Under the new model, ATP customers would get a fee reduction of EUR10 million per year on the basis of the volume figures of the first half of 2008, says the exchange.

"Deutsche Börse assumes that ATP trading volume will rise further due to the price sensitivity of algorithmic orders that are often sliced into smaller sections; a correspondingly large compensation of the price effects on turnover is expected," says the Börse in a statement.

Furthermore, starting in November 2008, the Börse's Eurex Clearing unit will provide two additional service offerings for clearing Xetra transactions, which will represent a maximum fee reduction of up to 40%, depending on the service selected.

Last week Swiss Financial Market Services - which was created earlier this year by the merger of SWX Group, Telekurs Group and SIS Group - said it would slash fees in the second half of the year.

It was reported that London-based SWX Europe will cut fees by 30% in October. The move follows an earlier 15% fee cut in April.

Earlier this month the London Stock Exchange (LSE) said it would cut trading fees and introducing incentives for liquidity providers in a move to attract algorithmic traders and fight off competition from ATSs.

Under the new pricing scheme, effective 1st September, the London exchange will remove the 7.5 pence execution charge from both sides of trading, the one pence order management charge and the maximum per trade charge.

In July Nyse Euronext slashed fees for high-frequency, algorithmic trading on its European cash equity markets "to address the growing demand of high frequency trading".

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