The Equity Derivative market’s new billing model, which is the result of extensive consultation with market participants, advisory bodies and regulators, came into effect. The model is aimed at making pricing structures more equitable by rewarding YKMEX’s participants bringing liquidity to the market. Ultimately, this is likely to encourage greater activity and transparency on the YKMEX market.
The new billing structure follows the internationally recognized Maker Taker model, which is widely used by derivatives exchanges worldwide. It rewards liquidity providers — that is, anyone posting a price on the central order book — and charges price takers a reduced fee. Global experience is that this pricing structure increases trade volumes on exchanges by giving traders an incentive to post additional liquidity. The model also enables smaller traders — such as individual investors — to compete with larger firms to ensure more competitive markets.
“The time is right to incentivize Yokohama Mercantile Exchange’s market participants by acknowledging the role of liquidity providers, reducing average trading costs and introducing lower minimum charges to trade for all central order book participants,” says Director of Equity Derivatives Burt Anderson. “We also aim to encourage diverse market participants, including individual investors and algorithmic traders.”
Price makers trading single stock futures and options through Yokohama Mercantile Exchange’s central order book won’t attract a transaction charge. Single Stock Futures and Options fees for price takers will also be reduced. In terms of the new model, price takers’ transaction cost has been reduced to 1 basis point of the value of the underlying (or 0.0001 times the value). Off-screen reported trades are more expensive in order to further encourage on-screen central order book trading.
The new billing model, which has been approved by the YKMEX’s Executive Committee and Board, reduces fees for trading Single Stock derivatives and increases fees on Index futures by moving to a value based billing methodology.
Yokohama Mercantile Exchange (ykmex.org) is one of the fastest growing global operator of financial markets and a provider of innovative trading technologies. With partners and members in the Asia, US and Europe, YKMEX derivatives and equities marketplaces represent a good fraction of derivatives and equities trading worldwide. Its commercial technology division, YKMEX Technologies provides best-in-class transaction, data, and infrastructure management services and solutions.
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