This week the LSE released its quarterly results which showed a modest increase in Q1 revenue and so it seemed like a good opportunity to dig a little deeper into its share of equities trading and see whether it really has turned the corner in the face of the competitive threat it has faced from the alternative MTF community.
The chart below shows the LSE’s market share of the FTSE 100 in the first 6 months of this year (to be fair, I have also included the lit and dark volume from Turquoise which it acquired at the end of last year). Also included in the graph are the total FTSE 100 shares traded by both volume and value over the same period. As you can see the LSE’s market share of its benchmark index seems to be flattening out and possibly even coming back a little bit.
This is in stark contrast to the same period last year when its market share plummeted by nearly 20 percentage points.
So, should we expect the bells to be ringing in Paternoster Square as the LSE celebrates having fought off the competition from those pesky MTFs? Well, yes and no. Obviously it’s good news that its market share of the FTSE 100 is getting stickier but over half the entrants in Europe’s top twenty most fragmented stocks are actually now FTSE 250 companies. This shows just how ubiquitous the whole fragmentation process has now become. And, just like other primary market centres, the LSE is also under pressure over market data fees and the possibility that CESR may impose a Mandated Consolidated Tape (MCT). If this follows the US model, then all venues will contribute to the cost, and share in the subsequent revenues, equally. This is good news if you’re a newcomer to the party but not so good if you’ve always enjoyed the lion’s share of the market data revenue cake.
The other dimension to all this is what happens in Europe as a whole. This point was well made by Alasdair Haynes in the Missoni Tapes which you can download here. Alasdair makes the very valid point that the pan-European picture is becoming increasingly important as the next front in the battle for liquidity. A quick look at Switzerland’s SMI index or Stockholm’s OMX S30 index only goes to reinforce this point.
Nevertheless, the LSE should be congratulated on the vigour with which it has responded to the challenges it faced, and it will be interesting to see how the chart looks in the first 6 months of 2011 once it has it shiny new Millennium Exchange matching technology in place.