27 September 2016
Monthly Notification, Saxo Bank
The new Order Driven Execution model, being released this November, is the cornerstone of Saxo’s ongoing commitment to deliver best execution for its client...
The new Order Driven Execution model, being released this November, is the cornerstone of Saxo’s ongoing commitment to deliver best execution for its clients by empowering them to take control of their trading. In addition to offering executable prices, the new order model will include further enhancements to clients’ ability to have greater control and transparency over their orders. These include user-defined price tolerances, and price improvements will be passed on to clients, while allowing for partial fills.
Overview & Scope
The way that Saxo Bank executes client trade requests is changing from a Quote Driven Model (green pricing) to an Order Driven Model (Quick Trade). This will apply to FX Spot, FX Forwards and CFD Indices, Commodities, Interest Rates and Bonds. FX Options are out of scope and will continue to trade on a Quote Driven Model (green pricing).
With the introduction of order driven execution, the trade button colours in the trading platforms will use a new convention where red will be used for sell buttons and blue for buy buttons (as already used in SaxoTraderGO when placing orders). This means that under normal market conditions, the trade buttons in the Trade Ticket and the Trade Board will be red and blue instead of green.
What is an Order Driven Model?
An Order Driven Model provides an executable price provided to Saxo clients that is based on Saxo’s own liquidity, in addition to liquidity available on a DMA basis in the broader market. The client is provided with greater control over the way that their order is traded through user-defined Price Tolerance, with the potential for benefiting from price improvements. An Order Driven Model may result in partial fills, but under normal market conditions a Market IOC order will be filled in full immediately.
Why is Saxo changing to an Order Driven Model?
- To differentiate itself in the industry by becoming more transparent in the way that Saxo handles client orders, thus enhancing our best execution practices. Early adoption of regulatory requirements (MIFID II Best Execution Policy) and the forthcoming release of the FX Global Code are the key drivers in defining ourselves as the most transparent and responsible FX and CFD trading provider.
- To extend the breadth of FX liquidity available to our clients. Saxo will be able to connect to a broader set of market venues (i.e. ECNs) that typically only operate under an Order Driven Model. This means that it will be quicker and easier to get client orders into these venues.
- Removing the ‘Liquidity Mirage’ by not showing a top of book price to all clients simultaneously but rather representing a price that must be dictated based on order size and liquidity available in the market at that time.
- Better alignment of FX Spot/Forward and CFD Indices, Commodity, Interest Rate and Bond products with the order execution methodologies of other asset classes.
- To enhance FX functionality with the introduction of partial fills, user-defined tolerances and price improvements. Offering our clients greater access, transparency and control helps to continue to democratise investment and trading.
More information will be provided in October.