December 22, 2017

By Viren Vaghela

Christmas may have come early for Aquis Exchange Ltd. clients.

The pan-European venue for share trading is offering free trading in Swiss stocks next month after it and CBOE Europe said a loophole in the revised Markets in Financial Instruments Directive will allow Swiss Exchanges to price Swiss stocks more flexibly than other European venues. Switzerland was granted equivalence yesterday under MiFID rules, meaning EU investment firms can continue to trade on platforms in the country.

The advantage relates to a so-called narrower tick size, meaning more favorable prices. In Europe, stock pricing is determined by looking at the average daily number of transactions in a given stock at the largest venue within the EU. For Swiss stocks, that’s CBOE Europe, with about a 10 percent share. Venues in Switzerland such as Six Exchange can use the average daily volume in their own market, which has about a 60 percent share. As Swiss stocks are more actively traded in Switzerland the so-called tick size is narrower.

“ESMA has created a massive own goal which means that people can’t compete with the Swiss market,” said Alasdair Haynes, chief executive officer of Aquis, in reference to the European Securities and Markets Authority. “Any customer will go to the narrower tick size as smart order routers are looking for the best price.”

The New European rules — containing more than a million paragraphs of text, and taking effect on Jan. 3 — will radically alter the way markets are traded, though a series of unintended consequences have left regulators scrambling to issue last-minute clarifications.

Haynes believes the anti-competitive rule for tick sizes in Swiss stocks will eventually be fixed but in the meantime he fears a flight of business to Switzerland

By Waving fees in January a customer trading about 50 million euros of Swiss stocks per day on Aquis could save at least 25,000 euros per month, he said.

Representative for the SIX Exchange didn’t immediately respond to a request for comment.