Chi-X fees a tenth of European incumbents’ – TowerGroup

Chi-X, a pan-European multilateral trading facility, will continue to siphon liquidity from exchanges because of its low transaction costs – up to a tenth of those charged by the incumbents – according to a new study from research and advisory firm TowerGroup.

The study compared Chi-X’s explicit and implicit trading costs with those of the London Stock Exchange, NYSE Euronext and Deutsche Börse in both high- and low-volume scenarios from October 2006 to October 2008. All three domestic exchanges combined account for roughly 70% of total European equity trading.

TowerGroup found that in a high-volume scenario, where trading volumes were 500,000 trades a month, worth a total of worth EUR 5 billion, executed on a 50/50 passive/active ratio and with an average trade size of EUR 10,000, the total explicit costs of trading on Chi-X were EUR 50,000, less than a fifth of the LSE’s EUR 258,001 and around a tenth of Deutsche Börse and NYSE Euronext’s costs of EUR 525,000 and EUR 497,500 respectively. Explicit costs include trading and clearing fees.