This content is from: Local Insights

The Netherlands

Euronext eliminates all-or-nothing order

Stock Exchange organization Euronext has eliminated the so-called all-or-nothing order as of September 1 2003, whereby investors and traders can ensure that a stock exchange order is either completely executed out or not executed at all. According to the stock exchange, this type of order confuses investors and too little use is made of it. This is particularly important with stocks that are rarely traded. Because of a lack of counterparties, an ordinary stock exchange order often leads to partial execution of the order. This results in high costs. Sometimes partial execution is inadequate for the acquisition of the necessary number of parts. According to Euronext, the all-or-nothing order leads to a lack of clarity among investors. "Confusion exists if the share price conforms to the limit set, but the order is not performed due to the number of parts not corresponding," it said. According to Euronext, too little use is made of the order in The Netherlands. "Less than 1% of the turnover in the order book is a result of all-or-nothing orders," the exchange said. In France and Belgium, the order is used particularly by private investors.

Stock exchange market makers

Euronext has again relaxed the requirements for market makers acting as counterparties for stocks in which there is little trade by agreeing to quote spreads for the stock on the central order book.

This liberalization is only valid for penny stocks - stocks that have been trading at less than €5 ($5.72) a share for several months. There is no change in the trading conditions for other stocks in which market makers are active.

Euronext has lowered the obligation of market makers to furnish facts in penny stocks from €10,000 to a minimum of €1,000 for which they are obliged to trade if an investor places an order. At the same time, Euronext has allowed market makers to raise the difference between their bid and ask prices from €0.20 to €0.25, allowing them to make more profit on each trade.

By lowering the obligation to furnish facts, the marketability of the stocks is reduced. Earlier this year, Euronext introduced a general liberalization of all stocks arguing that the requirements for market makers were unreasonable when market conditions were taken into consideration.

Matthieu Ph van Sint Truiden

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