A European stock exchange wanted to redesign its cash equity trading pricing model.
For a European stock exchange, the path to strong performance was in redesigning its cash equity trading pricing model. The existing pricing structure showed considerable room for improvement. There were certain design gaps that allowed its institutional clients to capitalize on loopholes, resulting in revenue volatility and operational inefficiencies.
The exchange aimed to introduce a new pricing model in order to address these challenges. The pricing model would improve revenue, stabilize trading revenue volatility, and minimize the risk of price list arbitrage by institutional clients.
We designed a behavior-based pricing model using monthly commitments and client activity clusters to drive stable revenue and tailored pricing.
Our team partnered with the exchange to design a modern, behavior-driven pricing framework based on two important levers: monthly commitment levels and activity-based client clusters.
First, we introduced monthly minimum commitments for each client. Under the old model, its clients could “game” the system by adjusting their trading activity to avoid higher fees, resulting in inconsistent and unpredictable revenues. The new pricing scheme aimed to ensure a more stable revenue stream for the stock exchange while encouraging clients to maintain consistent trading volumes with our client.
We segmented clients based on trading patterns, activities, behaviors, and then tailored offerings and pricing to specific activity clusters.
We designed a behavior-based pricing model using monthly commitments and client activity clusters to drive stable revenue and tailored pricing.
The new pricing model delivered significant improvements across the European Stock Exchange's revenue structure. The share of recurring fees over trading fees increased, creating a more stable and predictable revenue stream by reducing reliance on volatile trading activity. The redesigned fee structure introduced inbuilt incentives that encouraged consistent trading behaviour, effectively rewarding market participants that consolidated their trading volume with our client. Additionally, the new framework enabled sustainable revenue growth in cash equity trading, aligning with the exchange’s long-term objectives while maintaining client satisfaction and market competitiveness.
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