By Adam Wood, Head of Turquoise Europe & Securities Trading Specialist Sales, LSEG, and Alicia Suminski, Turquoise Execution Services Senior Business Development Manager, LSEG
European retail brokers are always looking to deliver the best outcomes for clients’ orders. Not only does this ensure compliance with regulatory requirements, but it builds trusted relationships between clients and brokers. So if you’re seeking the best possible price, what factors should you consider in choosing your venues? Is your order in a mechanism that mitigates predatory behaviour? How do you know if you have delivered best execution?
European retail investors are used to seeing their orders sent to exchanges, and expect them to participate in the price formation process. Just like any institution on trading venues, such as regulated markets or MTFs, brokers serving those retail investors understand the elements of competition and their associated benefits. However, as each trading venue has a different business model for charging market makers and brokers, it can be challenging to know with certainty whether executed trades have achieved the best possible outcome.
So how can retail brokers avoid the detrimental effects while accessing the same or better results for their securities trading practices?
Broaden your access to Best Execution outcomes
The main considerations when retail brokers decide on which trading venue they should route their orders, are:
- Cost – Connecting to a trading venue generates connectivity and post trade costs
- Habit – If it works at the moment, why change?
- Existing relationships – You know what you are going to get, the type of liquidity that is available, and the execution fees
These all make it easy to ignore the potential alternatives in the market. Each retail broker also has its own best execution policy, and retail investors must be able to understand what each policy means when pursuing the best outcome for their orders. Regulators have put the onus on retail brokers to prove that the best possible outcome was achieved, with legislation stipulating that execution price and cost of execution are crucial for retail investors. But if you are not connected to the right venue, how can you be sure that you’re achieving best execution?
For example, one venue may have zero execution fees but less competitive prices, while another may have better prices but non-zero execution fees. In each of these scenarios, there will be times when one model will yield a better outcome than the other.
Additionally, execution efficiency should not be overlooked. It is important for building retail investors’ trust in capital markets which, in turn, will increase the level of investment in the real economy from these key market participants.
Why trade with Turquoise Europe?
At Turquoise Europe, we are not expecting retail brokers to route all their orders to us. But we do want you to question whether you are able to get the best possible outcomes given your current trading venue connections. We pride ourselves on being able to unlock new opportunities for retail brokers to achieve best execution and get their business done more efficiently, and at a lower cost.
By providing a single point of access to pan-European securities markets, retail brokers routing orders to Turquoise Europe will be able to offer a broader choice of markets to their clients without having to multiply connections to markets that enjoy less coverage from other MTFs due to their size. In addition, Turquoise Europe is waiving real time market data redistribution licence fees to retail brokers in order for their clients to truly embrace the portfolio diversification opportunities that European capital markets offer outside their domestic markets, with over 2,500 securities to choose from.
And while geopolitical factors may have led to an influx of choice of new trading venues, Turquoise Europe is not just a new platform. We provide the security and comfort of working with a 300-year-old exchange, with a forward-thinking mindset so that you can take advantage of the latest technologies and innovations to enhance your equities trading experience. A prime example is our enhanced auction process for retail brokers, which is fostering “better” best execution by allowing retail brokers to trade closer to the primary market’s mid-point. Our solution also allows passive orders to benefit from price improvement, an outcome that cannot be reached in an ordinary central limit order book.
With competition intensifying across European securities markets, we are seeing more and more instances of static pricing. Turquoise Europe has chosen its lit auctions order book to host its new retail broker execution service, because it reverses the balance of power and provides the outcomes of a healthy price formation mechanism. This works by prompting the market to bid for the opportunity to execute against retail orders, with the price retail investors pay or sell at being the result of their orders’ actual interaction with the market.
But it does not end there. We have an existing network of participants. We have partnerships with seasoned liquidity providers. We have a resilient trading platform at competitive costs. So if you choose to add Turquoise Europe (Turquoise Plato Lit Auctions™) as an execution destination, your execution outcome will be the same price as the primary market or better at a transparent, low cost.
Retake control of your trading in Europe with a trusted, experienced trading partner to achieve better best execution. Choose Turquoise Europe.
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