Looking at the FFI today, I was intrigued to see that fragmentation in Paris and Amsterdam went down last week (by nearly 10%) compared to a small increase in London and a relatively unchanged week in Frankfurt.

Looking at the data more closely, the difference seems to be that Chi-X and BATS did less volume in Paris and Amsterdam than they have in previous weeks. This is even more surprising as overall volume at both these MTFs has increased over the week. This may be just a blip but it did get me thinking about how the overall shape of the European landscape may end up. One scenario is that, whilst the primary exchanges increasingly look to provide a pan European service (Deutsche Börse to Launch “Xetra International Market” in Q4), we may see that MTFs become more and more niche focussed. A good example of this is Burgundy which is “only” going to trade Nordic stocks but, in this way, is able to generate real momentum in its home market.

So, at one end of the spectrum, we may see a few Pan-European supermarkets that offer a complete range of asset classes that can be accessed by both lit and dark order types. These will find themselves competing with a number of smaller, local stores each offering specialist services either in terms of their stock coverage or in the trading styles they support. Of course, the MTFs would argue that they are actually cheaper than the supermarkets with which they compete but, as in real life, it is the total cost of visiting (connecting) and the convenience of the complete experience (clearing and settlement) that dictates where shoppers spend their money. Also, as can be seen from US equities markets, the current status quo is no guarantee as to which firms end up as the supermarkets and which as the local stores.

Finally, it was great to meet so many people at TradeTech in Paris last week. Thanks for all the positive comments about the site and what we are doing.