Lit MTFs
What is a lit MTF?
A lit MTF is an exchange that runs a displayed order book in parallel (bilaterally) with the primary exchange.
Why would I access a lit MTF?
Lit MTFs were created to introduce competition and drive innovation amongst exchanges, they offer different pricing mechanisms to the primary exchanges as well as routing logic that incentivises different types of liquidity.
9%
24%
65%
6%
25%
66%
21%
70%
15%
77%
6%
16%
72%
4%
23%
5%
68%
4%
4%
3%
5%
4%
3%
2017
2018
2019
2020
2021
2022
Primary
CBOE
Turquoise
Aquis
-
On venue market share 20%
-
Rebate model encourages participants to post liquidity
-
Are visible on the consolidated order book and are considered displayed (lit) volume
Key Points
Market share of displayed on venue volume
4%
26%
5%
65%
Lit MTF
The Venues
TRQA/TQEA
Aquis
AQEA/AQXA
Cboe & BATS Order Books
CHIX/BATE
CEUX
Turquoise Lit Order Books™
Lit MTF
How They Work..
Lit MTFs allow counterparties to submit displayed orders with quantity and price onto an order book that is individually operated by each individual MTF operator.
These prices are published in real time along side the primary exchanges and are firm order types.
Order Book Example
The consolidated touch in this example consists of 3000 shares
Consolidated
34.2
CIX
800
34.2
BTE
1200
34.2
TRQ
100
34.2
LSE
900
Primary
Primary also known as PBBO
Consolidated tape a.k.a EBBO is made up of the primary and the other displayed venues
The primary touch ("LSE" in the below example) is known as the PBBO
Touch Price
34.2 / 34.4
Primary
34.4
LSE
250
34.4
AQU
500
Consolidated
The primary touch in this example consists of 250 shares
Lit MTF
Order Types
Lit MTFs offer different order types to counterparties that combine other order books operated by the lit MTF
Lit sweep
-
Best price - will route to the book with the best price first, then the book with the second best price and so forth
-
Sequential - will sweep the book of entry first (regardless of price) then move onto the next order book
Dark sweep
-
Dark/Lit sweep order types: Before entering the lit book, the order sweeps CBOEs dark MTFs the residual can either be placed on the book passively or after entering the lit book (aggressively) cancel back
Turquoise
-
Offer a dark/lit sweep between their two order books
Aquis
-
Don't offer any inter book order types
Lit MTF Intricacies
Cboe & BATS Order Books
Intricacies
-
Maker taker model
-
Large amount of passive flow is sent here due to the rebates offered
Aquis
Intricacies
-
Liquidity providers can only post they can not trade aggressively (cross the spread) this was changed in Novemeber 2023 to an opt in.
-
Subscription based pricing model
Turquoise
Intricacies
-
None
-
Very recently (September 2022) replicated the maker taker model seen on CBOE
Payment Models
Maker Taker Model
This model incentivises users to post by paying them for providing passive liquidity.
For example: A counterparty who posts 100 shares worth €1550 passively on the offer that is then executed will receive a 0.15bp rebate (2 cents) and the taker will pay a fee of 0.3bps (5 cents).
Taker
CIX
Aggressive order
crossing the spread
sent to take liquidity
100
Pays taker fee
15.5
Receives rebate
CIX
Passive liquidity posted or the offer of bid
100
Maker
The Fees
Title | Maker Fee | Taker Fee | Source |
|---|---|---|---|
Cboe BXE | 0bps | 0.17bps | https://tinyurl.com/2xhw4hm6 |
Cboe CXE | 0bps | 0.24-0.3bps | https://tinyurl.com/2xhw4hm6 |
Turquoise | 0bps | 0.3bps | https://tinyurl.com/2ma39mkv |
Cboe DXE | 0bps | 0.24-0.3bps | https://tinyurl.com/yua3mus8 |
Aquis, works on a subscription model which can range from £500-125,000 a month - more details here https://tinyurl.com/nhhe5zs9