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This diploma thesis analyses the cost components involved in cross-border trading of equities listed at several European stock exchanges..

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This diploma thesis forms the second part of a best execution analysis concerning
securities cross-traded on several European stock exchanges. The first part of
the analysis tries to elaborate the possibility of arbitrage situations or situations
where cross-traded equities are bought at sub-optimal prices, but abstracting
from all costs related to such trading against which arbitrage gainings would
have to be offset. Therefore, this second part of the analysis aims at identifying
the factors that impact on total execution costs, which is the incorporation
of costs directly related to trading in the assessment of the profitability of arbitrage
or trade-through situations. To achieve this aim, an abstract model for
the costs along the transaction chains of five European securities platforms, XETRA
in Germany, Euronext Paris S.A. (ENP) in France, Mercato Telematico
Azianario (MTA) in Italy, SWX Europe (virt-x) (SE) and Chi-x (CX) will be
developed in this study in order to assess if arbitrage and/or trade-through situations
still hold after the incorporation of those costs. As a matter of fact, trading
of securities in Europe has long been governed by individual regulations of the
several member states of the European Union (EU). Therefore they resulted and
still result in a multitude of systems used for dealing with securities trading and
the successive steps necessary for the conclusion of trades. Hence, trading of
cross-traded securities involves the transfer of securities bought on one trading
system to another trading system. The costs of such a cross-system transfer will
also be incorporated in the analysis of this study.

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Köhler, Thomas
Thomas Köhler is a Capital Markets professional working for Deutsche Börse Group.

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