Eurex is to launch an incentive program designed to increase client proprietary trading as well as comprehensive measures to further optimize Eurex technology. Both measures aim primarily to increase fully computer-supported trading, known as “algorithmic trading”. Furthermore, prices in individual product groups will be harmonized in a drive to make the products in question even more attractive.
The program designed to boost proprietary trading will be introduced on 1 February 2007 and will include volume discounts for exchange-based transactions in key Eurex product groups. The discounts offered will amount to 10, 20 or 30 percent, depending on the specific product group thresholds. For capital market futures, for example, a discount of 10 percent will apply to volumes of between 0.4 million and 0.8 million contracts traded. This discount will increase to 20 percent for volumes of up to 2.4 million contracts, and to 30 percent for any volume in excess of this threshold. This means that proprietary trading clients can trade and clear additional contract volumes at a cost that is up to 30 percent cheaper than at present. As far as the globally traded Bund Future contract is concerned, this corresponds, for example, to a reduction from EUR 0.20 to EUR 0.14 per contract in the highest discount category.
Eurex will also be reducing the prices for Swiss and US equity options to EUR 0.20 and CHF 0.30 respectively, bringing them into line with the prices that currently apply to most European equity options. With respect to capital market products, all futures and options will also be harmonized at the lowest price level of EUR 0.20 or CHF 0.30 – the price that already applies to derivatives based on German government bonds, for example. To achieve this harmonizations, Eurex is lowering the fees for CONF futures, Eonia futures and futures and options on the 3-month Euribor.
The implementation of the “Technology Roadmap” is Eurex’s way of responding to the growing importance of algorithmic trading on the derivatives market and will allow it to set up the systems required in order to enable future growth in this segment. Eurex will be able to offer its clients higher data throughput rates and faster system response times, moves that will help to optimize trading activity at operational level. With effect from 18 December 2006, Eurex will be providing its clients with all order book updates and, as a result, the entire price chain in real time and on an unnetted basis for the first time. In the course of 2007, Eurex clients will be able to configure the delivery of the order book data they wish to receive themselves, giving them even more scope to tailor the service to suit their needs.
The optimization of various different software components, such as the matcher and the broadcasting modules will also allow Eurex to considerably reduce system response times and to boost the throughput of the entire system. This, combined with upgrades to the Eurex hardware, i.e. increase in the number of hosts, the available CPU performance and the storage media, will lay the foundation for further growth. Once the measures have been implemented in full, the Eurex platform will offer substantially faster response times and will be able to process a transaction volume of more than one billion quotes a day.
These measures represent a key step in implementing the initiatives as part of the company‘s strategic plan to promote further growth and specify the investment plan for the Eurex segment unveiled as part of the Q3 results in November. Applying the fee model that will become effective 1 February 2007 to the first nine month of 2006, sales revenues from trading and clearing at Eurex would have been reduced by around 25 to 30 million euros. This price reduction will affect Deutsche Börse and SWX Swiss Exchange in accordance with the profit allocation ratio of 85:15. The price reductions are countered by the positive effects of the expected acceleration in growth. In Deutsche Börse’s cash market the introduction of volume discounts for algorithmic trading has already proved successful.
