Embracing market opportunities

As a global supplier of transaction services, Neonet’s mission is to simplify global trading, enabling their clients to capitalise on increased trade fragmentation and new technical opportunities. Based in Sweden, the company was established in 1996, with growing operations also conducted across the UK, Italy and Germany, as well as the US.

The company is also one of the pioneers in Direct Market Access (DMA) and transaction services for efficient global trading. DMA is renowned for offering lower transaction costs, lessening the possibility of error or execution irregularities, and being extremely fast and fluid, thus allowing traders to take advantage of very short-lived market opportunities.

“Our trading environment is profoundly different,” explains CEO Simon Nathanson. “It is the excellent combination of execution services and trading technology that makes us so unique.

“For instance, we have developed, in-house, a technology platform that is tenacious and robust enough to be sold as a stand-alone product. Additionally, we have a very skilled set of trading desks that can handle the most advanced of execution programmes, around the clock and around the globe. We own and control our whole infrastructure – from the customer’s front-end, to the exchanges and back; this is something that gives us tremendous flexibility in adapting to the new demands continuously posed by our clients.

“More and more clients are looking for increased liquidity and it is very difficult to get that if you can’t get a consolidated overview of trading in today’s fragmented market. People trading on traditional markets, such as the London Stock Exchange, only see 60 percent of what is available, because 40 percent of the FTSE 100 is traded on other venues. Thus, market participants miss out on a lot of prices.

“Thankfully, Neonet provides the solution as, through our market connections and sophisticated technology, our clients gain an easily accessible and comprehensive solution for trading in exchanges and alternative marketplaces worldwide.”

Neonet achieves this by providing access to the most liquid marketplaces, in addition to by supplying technical solutions that enhance the efficiency of global trading. Neonet XG, the company’s progressive trading technology service, has a strong position, with the trading platform facilitating Best Execution regardless of the marketplace. This software offers clients a full suite of high-performance technology products to ease trading on the world’s leading exchanges and execution venues.

Shifting markets
New marketplaces, combined with changing trading patterns, ever-faster technological progress and market harmonisation, are shifting the underlying conditions for players in financial markets. According to Mr Nathanson, the financial landscape is undergoing substantial change, and clients potentially have a lot to gain from this.

“Traditional exchanges have lost their monopoly following challenges from new, more agile players; banks and broker-dealers (including Neonet) are two of the players driving this development forward.

“Thanks to its combination of trading and software services, Neonet has secured its solid position within this new financial landscape. The greater fragmentation of stock exchange trading is creating new business opportunities for us. In a complex landscape, with many more marketplaces, it becomes increasingly difficult for investors to ensure that they always gain the optimum price for each trade in stocks available on many markets. This is where Neonet comes in, by simplifying global trading and meeting the challenges that fragmentation entails for our clients.”

By integrating exchanges and marketplaces in a uniform manner, the Neonet system facilitates cross-border trading and contributes to high user-friendliness. The company is cutting-edge because it has built a package that makes life easier for its professional clients. 

“Neonet offers an overview of European trading and guarantees that transactions are completed promptly, with Best Execution in shares traded on many markets. Our clients are given the potential to rapidly and readily access the most liquid marketplaces. We offer more exposure to our clients, so they get better results, and witness better performance.”

Simply put, Best Execution signifies that Neonet, as a market player, ensure that their clients receive prompt management of their transactions and the best trades in shares that are available across a number of markets. Thus, by offering superior transparency and aggregate liquidity, Neonet promotes increased competition among European marketplaces.

Asked whether all players can offer Best Execution, Mr Nathanson’s answer was a definitive ‘no’. 

“The ability to deliver Best Execution requires infrastructure for high-speed technical connections, commercial agreements with many marketplaces and advanced software to identify the best trade. This, in particular, is a core feature of Neonet’s client offering, and an area in which we really are at the forefront of developments.

“Our Consolidated European Order Book creates an overview of liquidity from all marketplaces and the new generation Smart Order Routing technology ensures Best Execution. This means that we send client orders to the best marketplaces for each trade, irrespective of whether that is a traditional stock exchange, an alternative marketplace or a combination of both. Our clients favour our well-developed infrastructure, since we compare prices among more marketplaces than many other players.

“Furthermore, our technology – in itself – is very cutting-edge. Our clients can easily exploit opportunities offered by it, while simultaneously avoiding costly investments in infrastructure and technology.”

But despite all the positive progress, Mr Nathanson admits that Neonet has been affected by the global recession and that some of its clients have been less active in the market.

However what we see now is a good inflow of clients, confirming the considerable interest in our systems and services.

“I think people are coming out of the recession and being honest with themselves with regards to their comfort level, as well as the day-to-day volatility that different investments have. But that is natural, and to be expected.”

There is no doubt that, in a time of growing fragmentation, the ability to quickly connect with new marketplaces is a decisive factor in reaching global liquidity. Neonet is a leading supplier of connections to new alternative markets, as well as traditional stock exchanges. It is also a question of having the required technology to allow you to achieve this.

In fact, Neonet has long-since positioned itself to be able to capitalise on the comprehensive changes occurring in financial markets, while also being involved in driving its development.

“We are really dedicated to leading the way into the new financial landscape. Let’s take dark liquidity as an example; as part of the development of Europe’s market structure, we are seeing an increase in dark pools – electronic marketplaces providing institutional investors with the opportunity to execute major transactions, or to trade in illiquid securities with reduced market impact. We continuously add new markets and develop solutions that simplify access to lit and dark liquidity. In total, Neonet offers trading in seven dark pools, and also launched a sophisticated algorithm that sweeps the dark pools for non-displayed liquidity.”

The company’s evolution has not gone without reward, with Neonet listed on the NASDAQ OMX Nordic Exchange in Stockholm and with clients in regions all over the world. 

“Having successfully tackled the Nordic and European markets over the last couple of years, we are now starting to invest our efforts in Asia,” continues Mr Nathanson. “We are very proud of everything that we achieved, as well as the fact that people have had to up their game in competition.

‘We have made it so that our clients can exploit opportunities offered by the new markets, while simultaneously avoiding costly investments in infrastructure and technology. Because we help to seek out the best price for our clients, we know that we are promoting increased competition among European marketplaces, and that can only be a good thing. We’re very glad to be a central element of progress within this revolutionary and cutting-edge financial future.”

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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