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MDAX are realized through floor trading43. As in London or Amsterdam, no price link is
enforced between XETRA and the floors, which may lead to discrepancies in the prices posted
in these two trading venues44. As for OTC trading, no figures (prices or volumes) are available.
OTC trading is reported at the end of the trading day, as part of the total trading volume.
According to our estimations for October 199845, OTC trading represents 70% of total trading
volume for the biggest stocks.
5.2.2 The role of dealers
As previously mentioned, some of the trading systems (namely NSC, XETRA, and TSA) allow
dealers (so-called Animateurs in NSC, Betreuers in XETRA and Hoekleden in TSA) to provide
additional liquidity for small capitalization or less liquid stocks. These dealers are compensated
75,000 shares). But more than 97% by value of trades larger than 2NMS are conducted away from SETS.
42
Review & consultation, Stock Exchange Electronic Trading Service, London Stock Exchange. See also Board
and Wells (1998).
43
Source: DBAG. In addition, we calculated the turnover in value captured by XETRA for DAX stocks based on
real time data from October 15 to November 12, 1998. We found that on average 76% of all transactions in value
for these stocks was taking place in XETRA.
44
For instance the newspaper Welt Am Sonntag of Saturday, November, 7, 1998 reports price discrepancies larger
than 1%.
45
We calculated OTC turnover for the nine largest market capitalizations using real time data for October, 1998.
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for the services they provide by receiving privileges. These privileges and the corresponding
obligations significantly differ among exchanges. Table 6 provides a summary of these
obligations and privileges.
The Paris Bourse introduced Registered Dealers Agreements (RDAs ) in 1992 in order to
improve liquidity of medium and less liquid stocks46. Under RDAs , Animateurs (one or more
per stock) continuously have to post bid and ask quotes for a minimum amount which varies
according to stock liquidity47 with a maximum spread of 5% (2% for more liquid stocks). They
have similar obligations in the pre-trading phase before call auctions. It is important to note that
these offers are made within the limit order book of each stock. Thus Animateurs directly
compete with other limit order traders. Market surveillance checks in continuous time that they
comply with these obligations. As a compensation, Animateurs do not pay trading fees.
Furthermore the Animateur of a stock has the possibility of signing a liquidity agreement with
the major shareholders of the company and other financial intermediaries. Under this agreement,
the Animateur and the other participants in the agreement commit capital in order to sustain the
liquidity of the stock in which the Animateur makes the market. They do not have other
privileges over market participants48.
In contrast with NSC s Animateurs, Betreuers (one or more per stock) in XETRA are not
obliged to continuously post bid and ask quotes for a minimum quantity. They are only required
to respond to members requests (indication of buy or sell interest) by entering a two-side quote
(with a maximum spread of 2.5% to 5% depending on stocks) within a fixed period of time and
for a minimum amount49. They must also place orders during the pre-trading phase in call
auctions. Their performance is checked on a monthly basis. As a compensation, Betreuers do
not pay trading fees. They also have knowledge of the identity of the member making a request.
Finally, in call auctions, they have priority of execution for the surplus remaining at the end of
the call auction (during the Order Book Balancing Phase) with a maximum possible trade size
per Betreuer (20 times the minimum quote size).
46
In 1998, 225 stocks are traded with RDAs .
47
These amounts are respectively FF50,000 for stocks that trade continuously (liquid stocks) and FF20,000 for
stocks that only trade in call auctions (less liquid stocks).
48
For stocks that trade on the Nouveau Marché, market makers have similar obligations. They are required to post
bid and ask quotes for a minimum quantity that varies from 100 to 1000 shares depending on the stock price with a
maximum spread of no more than 10%. They also make similar offers 15 minutes prior to each call auction. As a
compensation, market makers do not pay trading fees and can be the counterparty of all trades (even for principal
trades conducted by other members if they wish so).
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5.2.3 Transparency
The transparency of a market is the amount of information regarding the trading process, [ Pobierz całość w formacie PDF ]