Xetra RLP - The First Three Months

On 20240520, the Xetra Retail Execution service went live. We now have (almost at the time of writing) three months of data. Enough to get a first glance of how things are going for the parties involved.

I have described the elegant market mechanism previously and only want to show some stats here. I just want to point out that the public market data allows one to identify trades between retail orders (submitted via a retail broker, RMO) and a retail liquidity provider (RLP). So, all data shown below can be obtained solely from the EOBI data.

Only RMO-vs-RLP orders are addressed here. Retail orders matched against "normal" orders are no considered. Let's go though the different charts in Fig. 1 below. From top to bottom:

1. Daily traded notional by market segment (color coding) and whether the trade benefitted from price improvement, i.e. traded inside the "normal" BBO (upper half) or at the BBO (bottom half). After brief ramping-up, volumes have stabilized in that they mostly vary based on the overall market volume. For non-DAX/MDAX/SDAX names, most of the volume enjoys price improvement. These securities typically trade multiple ticks wide and so it is possible for the market maker to do so. Most of the volume in DAX constituents, in contrast, is matched at the BBO. But since these stocks are only one or two ticks wide, market makers cannot offer a two-sided price improvement.
2. Number of trades per day - again by market segment (color coding). We see that there as many non-DAX/MDAX/SDAX trades as there are DAX trades but they comprise a small fraction of the notional (top panel).
3. Number of distinct securities with at least one RMO-vs-RLP trade.
4. Cumulative price improvement for retail orders. Retail clients have saved over 125 kEUR since the start of the program through price improvement.
5. For those trades with price improvement, the average magnitude in basispoints. The 2.2 bps for the DAX, for example, correspond to 1 tick.
6. The T+10 second markouts for retail liquidity providers. We see that despite the occasional price improvement, average markouts are consistently and strongly positive. Almost +3 bps for DAX trades vs. -0.3 bps for the market as a whole. The less liquid the security, the better the markouts - mostly because these instruments have a wider spread.

All in all a win for retail clients (price improvement) and liquidity providers (positive markouts due to lack of adverse selection).

Hopefully, more retail brokers will see the light and come aboard the RMO/RLP-train over the coming months and years.