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Index Fragulation

Following a number of requests the boys in the Labs have now added the ability to fragulate entire indices, not just stocks. To do this you can either click the abacus icon next to each index on the main site or select them directly from the Fragulator™ page.

This helps provide another dimension to understanding what’s really going on in Europe. I’ve been having an initial fragulate comparing different date ranges across various indices and have come up with some interesting facts:

The LSE’s share of the FTSE 100 and FTSE 250 total markets (i.e. lit and dark) has almost halved in just a year from 62% to 35%.

In just 12 months BATS Europe has managed to get nearly 5% market share of the total liquidity (lit and dark) in the FTSE 100.

Average trade value on the DAX has fallen from €34,000 to €15,000 in the last 18 months.

SIX Swiss Exchange’s share of the SMI has fallen by 10% in the past twelve months.

There is increasing convergence of trade sizes between the lit and dark categories on nearly all stocks and indices.

Perhaps most interesting of all is the growth in non-lit volumes (dark, OTC and SI) and this highlights how the market needs greater transparency in reporting. It seems unfair that the areas that are growing at the fastest rate have the least obligation to report their activities clearly, concisely and in a timely manner. Anyway, have a fragulate of your own and let me know what results you manage to come up with.

On a different note, thanks to Helle Søby Thygesen who invited me to participate at an event for the Danish Securities Dealers Association in Copenhagen last week. The event was packed and the conclusion reached was that the Nordic markets show all the same signs of fragmenting as their European counterparts. The real question is whether the trading community is ready in terms of making the necessary investment in technology.

And finally, it’s nice to see that Spain now gets the joke with regard to fragmentation and will be simplifying its clearing structure to allow easier access by MTFs. This highlights another point made by Karel Lannoo, CEO of the Centre for European Policy Studies, at the Copenhagen event. Karel was explaining how the next round of legislation from Europe will be armed with real teeth and that the new regime will be far more rules based than the principles based approach we have witnessed up to now. Karel even went on to say that we will end up with a single European style FSA to enforce all this regulation on every country. Let’s just hope the guys making the decisions avoid the ready, fire, aim approach that seems to have characterised their approach so far.

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