Will Citadel’s disclosed new fee structure for its ATS trigger a round of pricing innovation?
In a departure from the dark pool norm, Citadel yesterday announced to its clients a new pricing structure for its ATS, Apogee: a 2 mil per share rebate for all IOC orders. Current fees are not publicized but generally brokers charge between something and nothing for taking liquidity from their pools.
Since brokers have client discretion and no obligation to publicly disclose their fees, they tend to be coy, making this announcement somewhat unique. Inverted pricing is not a new concept and BATS has a history of inverting maker/taker to grow market share. However, Citadel’s pool sits upstream of all the exchanges. This increases its potential to be the first stop for an order starting to pinball its way to market and the possibility of a 3 mil charge.
Dark pools provide just one part of the brokers’ revenue, so we should not automatically assume other brokers will naturally follow suit in terms of either pricing or disclosure but this may largely depend on how successful their own pools are (see the TABB Group Liquidity Matrix). The pricing structure is also a shot across the bows of the exchanges which are fighting to increase their market share. NYSE’s retail liquidity program was launched on August 1st and had reportedly garnered eight tenths of one percent of NYSE market share by last week. While this percentage is yet small, the other main exchanges also announced similar programs. As daily volume sinks again and commission belts are pulled in another notch, efforts are going to be stepped up across the board to attract order flow and find innovative ways to do this.