Tokyo Stock Exchange starts development of ETF RFQ trading platform “CONNEQTOR”

Maria Nikolova

By providing an RFQ function, TSE aims to facilitate access to liquidity and top-class pricing for Japanese institutional investors so that ETFs can be traded faster and cheaper in Japan.

Tokyo Stock Exchange (TSE) has commenced developing an ETF RFQ trading platform called “CONNEQTOR“.

TSE introduced a Market Making Scheme for ETFs in 2018 with the aim of improving ETF liquidity, and has continued to make improvements to it since. In addition, to facilitate large-scale transactions that are difficult to execute in auction sessions, TSE began considering the provision of an RFQ (request-for-quote) function in October 2019.

TSE has decided to begin development of this service for market use as now the realization of the technology is in sight. The Exchange has completed the design process with the cooperation of many of the institutional investors who will become users, and has confirmed their needs.

By providing an RFQ function, TSE aims to facilitate easy access to world-class liquidity and pricing for Japanese institutional investors so that ETFs can be traded faster and cheaper in Japan.

The RFQ function enables institutional investors who want to trade a particular ETF at a particular quantity, etc. to send out a request for a quote to a large number of market makers. They can then trade at a price individually offered by a market maker. In CONNEQTOR, although the quotes are shown anonymously, the process is highly transparent, and investors are able to trade only at the best price offered.

Both initial and monthly fees are free, so that even institutional investors who trade less often such as banks and regional financial institutions can use the platform. TSE charges a trading fee (commission) to securities companies only when a transaction is executed.

Pilot test is set to start around the summer of 2020, and the service launch is planned for the end of 2020.

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