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Fragmentation within NYSE Euronext – The Great Dexia Debate

Since the official launch of this site yesterday, we have had thousands of visitors and many emails with questions and suggestions (thanks for the input, great to see you are reading it.)

One area that a number of you have asked about concerns our treatment of NYSE Euronext – currently we treat each sub-market separately. Your feedback has reignited an internal debate as to what “fragmentation” really means. 

The original goal was to take into account all the order books that a stock is traded across as this provides the purest view of where liquidity exists. One of the effects of this, however, is that a small number of stocks (and their associated indices) look “overly” fragmented. This is because the same stock can be traded on multiple (but different) Euronext order books. So, in the case of Dexia for example, trading is primarily split between the Brussels and Paris order books of Euronext and so this is reflected in a “high” FFI calculation.  The problem is that by just looking at the summary reports, it is possible to imply from this “artificially” high figure that it reflects liquidity moving to the new MTFs (although anyone who looks at the detailed reports will see that this simply isn’t the case). 

We know of a number of firms who do not trade all Euronext markets, either because they are not members of all the markets or because they have clearing and settlement issues between the markets. Because of this, we view stocks that trade across these separate order books as being legitimately fragmented.

An alternative approach would be to treat dual listed stocks as separate instruments. This is the view taken by Chi-X (http://www.chi-x.com/DualISINS.html) which states “stocks with the same ISIN and currency but different settlement locations should be treated as different trading instruments”. This approach results in lower FFI values for the dual listed stocks but then stocks such as Dexia would have separate FFI values for their Brussels and Paris listings.

A third, more radical, approach is that we just wait for Euronext to merge all its different order books into one.

Personally, I can’t get round the fact that if you want to trade Dexia, then you do have a choice of Brussels, Paris or the MTF’s. Shouldn’t our FFI figure reflect that?

Having said this, the overriding aim of this site is to provide the trading community at large with unbiased information that helps create an evolving consensus about what is really going on. Therefore I welcome further comments on this site so we can provide the most appropriate figures.

One Response to “Fragmentation within NYSE Euronext – The Great Dexia Debate”
  1. Rob Aldridge says:


    Won’t this issue be resolved by the Single Order Book inititiative by Euronext? There will only be onew trading line for each duel listed stock and although possible to trade on alternate lines these will only be OTC and so not included in FFI anyway?

    Many thanks

    Rob A

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