Lee Hodgkinson gives FTSE Global Markets his thoughts on why market quality is so important.
Market quality is a key differentiating factor for investors and brokers when selecting a trading venue. Given the variety of choices for places to trade, there is an implicit search cost. The higher the quality of a market the lower the explicit costs will be for the investor, assuring therefore a better quality of execution.
Indicators of market quality include, amongst others, presence time at EBBO, quoted market depth (reflecting the market’s ability to sustain relatively large market orders without impacting the price of the security) and quoted spreads (difference between bid and ask prices).
For our key European blue chip indices stocks (CAC 40®, AEX®, BEL 20® and PSI 20®) we account for:
* Source TAG Audit and NYSE Euronext, November 2012