Moscow Exchange rolls out the surcharge for unproductive load in its key markets
Following the FORTS Derivatives market, on September 3, 2012 the Moscow Exchange Securities and FX markets has successfully introduced measures to encourage effectiveness of the algorithmic trading.
Over the testing period of the surcharge calculation only 10 HTF traders on the securities market and 1 HFT trader on the FX market were informed of exceeding the threshold set at 20 orders per 1 ruble ($ 0.03) paid in commission. All such traders have adjusted their HFT algorithms that have resulted in a fivefold and twofold reduction of transaction numbers on the Securities and FX markets respectively. The number of trades and trading volume remained unchanged.
Algorithmic trading accounts for a considerable share of the trades made on the global exchanges. In 2009 HFT generated about 15% of the turnover on the Moscow Exchange stock market whereas in 2012 this share grew to 40% with the number of orders generated by HFT reaching 97%. Moscow Exchange thinks highly of the role of HFT in raising the liquidity on the market.
"The introduction of the surcharge on the securities and FX markets has brought about the optimization of the trading algorithms by some our HFT traders", said Alexander Ospischev, Head of Electronic Trading Development at Otkritie Capital. "Number of "idle" orders decreased with a subsequent increase of trades that led to a reduced load on the infrastructure of the broker and the exchange. As the move had been announced beforehand, most clients who potentially might be surcharged had a chance to prepare to the introduction of the surcharge and adjust their algorithms. It is noteworthy that most of the algorithmic trading systems of Otkritie Capital were not surcharged".
The biggest European and American exchanges have long been applying instruments of economic leverage to HFT traders designed to optimize their work on the markets. The Russian derivatives market FORTS for several years applied a transaction fee which had a very good track record of appliance. The main objective of such measure is to protect the trading system from the non-productive load onto the system and protect market participants from losses and technical failures.
"Moscow Exchange operates a world-class state-of-the-art software and hardware complex with the capacity to process the volume of the orders exceeding the current peak values multiple times", said Vahan Vardanian, Managing It Director at Moscow Exchange. "The terms of applying the surcharge by the Moscow Exchange have been designed in order not to hamper the HFT trading development in any way. The new initiatives of the Exchange together with encouragement of the trading members will contribute to the Russian financial market development and the market turnover growth. The Moscow Exchange strives to implement the latest effective solutions that meet the best world standards and make the Russian market attractive to all kind of customers around the globe".
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