Japannext Accepting Retail Flow
SBI Securities will use Smart Order Routing (SOR) June 27 to start sending orders to its sister company SBI Japannext in a bid to improve execution prices and to foster best execution in Japan. SBI Securities is Japan’s largest retail broker with more than 2 million accounts and could add as much as 100 Million USD in flow per day to JNX pushing its market share to 3%. This should further enhance liquidity and offer up to 9bps (9 USD on a 10,000 USD trade) in price improvement over the TSE Best Bid and Offer.
“SBI Securities is the largest retail broker in Japan with 2.2 million retail on-line investors. This will enrich the depth of the market liquidity, and we believe that the retail investors will soon realize the enhanced trading opportunity with better execution experience. It will be a true Win-Win situation.” said Masami Hatakeyama, SBI Japannext co-CEO and a director of SBI Securities.
Japan has no clear cut best execution policy and unbundling execution from research is unheard of. This move by SBI Securities will put pressure on the industry and regulators to spell out a higher standard for its retail investors. With 100 Million in notional expected to be added to JNX with an average of 9bps in savings that will translate into 1.8million USD per month in savings for traders.
In the second phase SBI Securities will offer better routing functionality allowing for different order types such as Fill-Or-kill (FOK) orders where orders that do not get hit on JNX will see the SOR cancel the order and resend it to TSE.
Margin trading on PTSs is not allowed and as such retail flow will be restricted by this caveat.
In May the Tokyo Stock Exchange saw trading volume of more than 38 billion shares worth 26 Trillion Yen (320 Billion USD) with domestic retail comprising around 22%.
At this stage SBI Securities has no plans to route orders to Chi-X Japan or Kabu.com the other two JSCC eligible PTSs in Japan. In the spirit of best execution and progressive regulations in Japan, however, this could very well change.