FIIs take to smart order routing

Foreign institutional investors (FIIs) are increasingly availing of the smart order routing (SOR) facility, which helps them get the best price for their transactions across exchanges in the country.

Within just a fortnight of its launch, Deutsche Equities, JP Morgan and Credit Suisse have taken a lead in using SOR to execute orders on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Goldman Sachs, Citi Group and a host of other FIIs have also applied to exchanges to allow them to use SOR.

SOR trades, handled by Credit Suisse, have resulted in a six-basis-point average saving so far, as compared to trading without SOR.

The introduction of SOR, following long discussions and disagreements between BSE and NSE, will change the way equities are traded in the country. In an SOR system, trading engines automatically pick the exchange offering the best price at a given moment.

“The availability of SOR in India will enable investors save cost and will ensure a more efficient execution process,” said Murat Atamer, head, Product for Advanced Execution Services for Asia Pacific at Credit Suisse.

“There are price discrepancies currently, as it is difficult to trade both exchanges manually. But with SOR, clients can be confident they are achieving the best possible price without watching two markets,” Atamer added.

The combined cash and derivatives average daily equity volume on NSE is over Rs 1,00,000 crore. The exchange enjoys a monopoly, with over 98 per cent market share.