A managed analytics service, exclusively for exchanges:
Enabling a deep understanding of liquidity dynamics and well-informed benchmarking.

Exchanges are facing fierce competition due to a growing diversity of liquidity discovery mechanisms and trading venues operating across Europe. Market operators are having to keep a strongly informed view on what influences liquidity dynamics; not only do exchanges need to monitor participant level performance, they need to provide evidence of best execution to their clients.

In today’s trading environment, the clients of exchanges want to go beyond simple transaction cost analysis (TCA). In terms of post-trade best execution analysis, these organisations are beginning to use actual execution analytics, and the use of that knowledge is helping drive decisions. But in order to provide this, exchanges need a consolidated view across different venues, and they want to be able to have this capability without investment into expensive infrastructure, such as smart order routing technology. This is why BMLL has introduced Exchange Market Participant Analytics (EMPA), a managed service for exchanges to better analyse and understand their market participants.

‘Exchange Market Participant Analytics’ as a managed service

The BMLL EMPA managed service enables exchanges to gain access to value-add analytics via combined public order book data and anonymised market participant data. By using this managed service, exchanges are able to use the data to manage their incentives structures and incentivise correct behaviours. Further, they can analyse and report on granular executions per liquidity provider to benchmark and report on activity. BMLL Level 3 Data provides the fullest picture of market quality, liquidity and order book dynamics. Immediate, large-scale, complex computation for execution benchmarking is possible, and market participants can identify the best price across multiple market mechanisms.

BMLL metrics are derived from every single insert, modify, execute or delete order message across every venue, available at daily and intra-day resolution. BMLL only needs anonymised data that can be mapped to the order book trade id’s, which can then be de-anonymised by the exchange in its own environment.

Managing the heavy lifting around data normalisation

One example of the BMLL EMPA managed service in action can be seen via the Swiss Stock Exchange (SIX). Anonymised order data from the SIX Swiss EBBO (European Best Bid and Offer) is combined with BMLL’s fully harmonised cross-market Level 3 Data, offering Swiss market participants a consolidated view across European venues.

SIX’s Swiss EBBO provides participants with a unique opportunity to find the best price and liquidity in Swiss shares across the Central Limit Order Book, Mid-Point Order Book and the EBBO Book. Combined with execution performance reports, the innovative SIX Swiss EBBO service helps participants navigate across fragmented markets and supports its clients in their best execution efforts.

In order for SIX to keep fully abreast of the dynamics around liquidity, BMLL provides customised order book analytics for SIX Swiss EBBO. Unique data analytics and data harmonisation expertise from BMLL is combined with the performance metrics of liquidity providers active on the SIX Swiss EBBO book, particularly focusing on the quoted time and volume at EBBO for Swiss equities.

In actual fact, SIX’s Swiss EBBO has doubled trading turnover since June 2021. With approximately 20 trading participants (made up of mainly regional Swiss banks and brokers) currently regularly posting EBBO orders, SIX can customise the analytics and reports per client, allowing for a full view of the liquidity landscape.

“BMLL has mastered this heavy lifting around the data normalisation process,” commented Marc Berthoud, Head of Exchange Data Strategy at SIX. “Second, it's a neutral provider which makes our service even more credible, and it's a cost-efficient service from our perspective. Lastly, and I would say most importantly, BMLL provides excellent quality of support.”

Innovation is the only way forward

The SIX Swiss EBBO service enables practitioners executing on multiple trading venues across Europe to find the best price for execution. In turn, the BMLL Level 3 Data analytics allows SIX to evidence the successful execution at, and improvements on, EBBO. In addition to BMLL’s EMPA managed service helping exchanges understand their market participants, BMLL also offers the BMLL Data Lab, which allows users to upload and manage their own data, and combine it with the public order book data from BMLL. Most exchanges first start with EMPA, and then move to upload their content on to the BMLL Data Lab to run additional analytics.

In a competitive marketplace, complacency is not an option for exchanges, innovation is the only way forward. By working together with BMLL, exchanges can obtain an immediate understanding of liquidity dynamics and well-informed benchmarking. This then leads to solid investment in new products and the timely delivery of innovative solutions to their clients.

Read more about SIX and the EMPA managed service