ION’s XTP Execution now offers direct access to Cboe Europe Derivatives (CEDX). Mike Hughes, global head of front office product management, ION Cleared Derivatives, spoke to Best Execution on the “intense pressures” European trading firms face, the fragmentation of European equity derivatives, and the evolving role of automation.
ION’s XTP Execution now offers direct access to Cboe Europe Derivatives (CEDX). Mike Hughes, global head of front office product management, ION Cleared Derivatives, spoke to Best Execution on the “intense pressures” European trading firms face, the fragmentation of European equity derivatives, and the evolving role of automation.While XTP Execution offers fully automated trade workflow, automation also assists with best execution through price formation, Hughes said.
“Centralised electronic trading on-screen, as opposed to bilateral negotiation, makes the best price available to a wider set of participants,” Hughes said. This allows for real-time price adjustments, the reduction of inaccuracies and less time spent on manual pricing that could be utilised for other more business-critical operations.
“In addition, it offers the ability to leverage ION’s existing automated workflows, both high and low touch, which all contribute towards achieving best execution,” Hughes added.
Looking further afield, towards North America and APAC, Hughes said European equity derivatives trading is more fragmented. “Participants trading on the exchanges need to access multiple exchange venues and clearing houses to execute their business across Europe and the UK.
“Likewise, apart from some global index products, the growth in derivatives trading on Asian exchanges has been focused on domestic retail flows.”
CEDX will be expanding into pan-European single stock options from November this year and as a result of the upgrade to XTP Execution, ION customers will benefit from the expansion of CEDX into pan-European single stock options through a direct gateway to the exchange.
Through this gateway, ION clients will have direct market access to CEDX’s pan-European product suite which will not only increase the liquidity options available, but also help to reduce transaction costs.
“This is of particular importance as trading firms in Europe grapple with intense pressures around record trading volumes and volatility, as well as identifying and monitoring risk and improving liquidity — to remain profitable and successful.”
Additionally, by facilitating direct access to CEDX, XTP Execution should lower barriers to entry for the exchange’s customers. “If CEDX, by expanding into pan-European single stock options, can emulate the success of US Equity derivatives trading in Europe, then all participants—direct and indirect—stand to benefit from increased liquidity and tighter spreads,” Hughes said. Even incumbent exchanges could benefit from increased participation resulting from wider adoption by investors.
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