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The periodic table

I read with interest, and some dismay, Sam Agini’s great piece in Financial News yesterday about Marcus Ferber writing to ESMA be-moaning periodic auctions. Perhaps the most asinine comment attributed to Mr Ferber is that some such mechanisms are a “blatant attempt to undermine the Mifid II provisions aiming at having a larger share of trading in the light”. It is... Read More

MiFID II – the best thing that ever happened?

So, if you’re planning to attend any kind seminar on what you need to do for MiFID II over the next few months, forget it and go to the movies instead. You’re simply too late and whatever plans you have (or have not) put in place will just have to do as there are only 6 months left to go. The more important questions concern how regulators will interpret and enforce the new... Read More

Thomas in Blockland

Thomas the crossing network wasn’t happy. For years he had enjoyed helping his friends buy and sell things amongst themselves. Sometimes he would even step in directly and agree to buy or sell something himself, especially if there was an awful lot of it. But now he had a tricky choice to make. The ruler of the land, The Regulator, had been convinced by the Exchanges that... Read More

Mince pies and MiFID

I spent the holidays diligently researching the best brand of mince pies in order to settle a pre-Christmas debate here at Fidessa Towers. Naturally my criteria included a number of factors including (but not just) price and, perhaps surprisingly, the winner was Tesco’s in-house bakery. Back at work, my attention turned to my other favourite M word – MiFID II – as... Read More

Bumpy road ahead?

Interesting story in the FT today about IEX and its application to become a fully-fledged exchange. At issue is IEX’s so-called ‘speed bump’ that will slow down the HFT ‘boy racers’ and so make markets safer again. Naysayers claim that the inclusion of a speed bump is contrary to the rule that investors should have “immediate” access to the... Read More

One million Fragulators can’t be wrong

I don’t often write about fragmentation these days, but I noticed this morning that our frag counter surpassed the 1 million mark. To be honest I was planning to write something later in the week, but thanks to a certain university in Italy that slurped its way through 15,000 fragulations at the weekend, I am a bit off the pace. I have to admit that when we first launched the... Read More

Clear and present danger?

There has been a lot of talk about how the LSE/DB1 merger might create a “too big to fail” clearing house. This seems to be missing the point somewhat as both LCH and Eurex Clearing are already too big to fail. Imagine the fallout if either of these were to go through some sort of disorderly meltdown – would the UK or German governments really just sit back and watch? The... Read More

Slicing up the merger mania cake

One of the great things about industrial logic is that it’s easy to slice it up in so many different ways. This appears to be exactly what is happening with the DB1 LSE merger and the rumoured counterbids from ICE and possibly others. Reuniting Liffe (now owned by ICE) with its original clearing house (LCH, now majority owned by LSE) would be powerful, especially when you throw... Read More

Germany and the UK show the way

The pixels were barely dry on my last blog post on the regulatory impact of a potential Brexit on the City of London, when news broke that LSE Group was in talks with Deutsche Börse over a “merger of equals”. The LSE has done a great job under Xavier’s stewardship of positioning itself for the practical realities of the industry today, which are all predicated on the premise... Read More

BATS auctions off the block problem

There has a been a lot of talk about how to trade blocks that are smaller than the LIS waiver but that are still too big to go to regular lit markets. The debate has been ratcheted up by the 4 and 8% dark pool caps that are part of the MiFID II spectre looming above us all. One approach, of course, is to chop your block into smaller pieces with an algo but this is becoming increasingly... Read More

GMEX – going to eleven?

The announcement that new derivatives exchange GMEX has received investment from SocGen reopened the debate here as to the future of rates trading and who the likely winners are going to be. Reliable data is hard to come by on exactly what is happening to OTC volumes and where they are going. Such evidence as does exist seems to show a steady increase in SEF volumes, although this... Read More

FragPro all wrapped up for Christmas

Following on from my last blog on the subject, the guys at Fidessa Labs have now made the latest version of the Fragulator available. Despite its name FragPro is still free, and yet it contains a bunch of cool new features. These include the ability to view stocks or indices by order book or venue owner (e.g. LSE Group including Turquoise, or all Euronext venues), track dark pool... Read More

Back in Block

On the way in this morning, I was listening to my favourite AC/DC album and thinking about the challenges of block trading. The problem is well known – a combination of multi-market trading, algos and DMA have created a vicious cycle that continues to shrink order sizes. This is compounded by regulators who insist that lit is better than dark and that the best way to demonstrate... Read More

The gift that keeps on giving

Since Thomson Reuters announced the withdrawal of its market share reporter, the phones have been ringing red hot with enquiries asking if we could build a replacement using our existing free-to-view Frag website. This prompted a fierce debate here at Fidessa Towers as to whether we should commercialise this opportunity and, if so, what new features we would need to add and how... Read More

Is Turkey voting for Christmas?

The recent announcement from BATS Chi-X Europe that it intends to list Turkish stocks got the phones ringing here at Fidessa Towers. Both local Turkish brokers and pan-European houses wanted to know if, how, and when Turkish stocks might fragment like their European counterparts. A colleague mentioned to me that surely the local Istanbul exchange and its immediate members would... Read More

The Future of Best Execution

I was chatting with a few work colleagues last Friday about best execution and derivatives. They confidently asserted that without real fungibility (i.e. the ability to trade the same instrument on different venues), price comparison is not possible and so any notion of best-ex was pretty meaningless. By coincidence, I was later looking at the wording in the best-ex policy of... Read More

Where’s my TV remote?

The recently proposed cap on European dark trading has caused quite a stir. It also illustrates how MiFID II policy-making has descended into almost Eurovision song contest levels of farce. The basic idea is to put a cap (currently proposed at 8%) on the level of trading that occurs away from lit markets. The rationale for this is to protect the regulator’s precious price... Read More

Phew! February was a good month too

I got a bit of stick for a recent post where I wrote about the apparent move back into equities trading in January. To be fair, I was only referencing other people’s work but, nevertheless, I was anxiously awaiting the numbers for February. The good news is that volumes in Europe seem to have held up pretty well. Just as before though, I asked the boffins to strip out the HFT... Read More

The rising tide in equity trading – who will benefit?

Been reading quite a bit lately about how good old-fashioned equities are finding their way back into investors’ favour. And this time it is more than just the indices that are on the move, volume traded is going up too. In many ways, volume or consideration is a more useful indicator of the general health of the trading industry and the US has reported record influxes into... Read More

Clearly better?

An interesting few days in London last week at the annual derivatives bash, IDX. Naturally much of the debate and discussion was on the impending collision of the OTC and exchange-traded worlds that Dodd-Frank and EMIR are determined to orchestrate. Unlike equities, the worlds of OTC and exchange-traded derivatives have gone merrily down parallel, but separate, tracks. The regulators... Read More

You pays your money, you takes your choice

Nice to see the row over Europe’s consolidated tape has been given a good old stir by BATS Chi-X as the market was at risk of subsuming to apathy. The problem is that whilst everyone wants a consolidated tape, they want it for different reasons. The point that BATS Chi-X is making is that the fees being charged by incumbent exchanges are simply too high. This is a tricky one to... Read More

Alternative venues play waiting game in Japan

Just back from an interesting week in Japan where I was presenting at the annual GMAC conference, Japan International Banking & Securities Systems Forum. The impact of Japan’s alternative venues (known as PTSs) was a particular area of discussion, especially now that Chi-X has set up in Australia and with Korea looking to introduce a multi-market structure too. It’s been... Read More

NYSE/DB – why Brussels got it wrong

Not much surprise at this week’s news then, but the rationale for blocking the deal seems odd. Firstly, and whatever they may claim, Brussels did take an overly Eurocentric view. Just call the CME in Chicago and ask where Liffe and Eurex appear on its list of major competitors. Secondly, the Commission claims that LIFFE and EUREX themselves compete but, in fact, they are effectively... Read More

Tobin, or not Tobin – that is the question

Well at least it is in France, as reports seem to confirm that its finance minister is enthusiastically pushing ahead with a unilateral Tobin-style tax on equities, bonds and derivatives trading. It’s a shame that the proponents of such a tax don’t seem to have done even a basic amount of homework. The original idea introduced by Nobel Laureate economist James Tobin was conceived... Read More

Size matters

An industry colleague pointed me towards an interesting YouTube video the other day that helps illustrate the importance of tick size in the global battle between primary and alternative trading venues. The video is from an alternative venue (or PTS) in Japan called SBI Japannext which, together with Chi-X Japan, is continuing to grow its market share of the Nikkei 225. The two... Read More

Too early to tell?

Hope you like the new dedicated Australia page on the Frag website. Even if you’re not directly interested in antipodean fragmentation, Australia will provide a particularly pure data set for what is fast becoming a global phenomenon. This is because (right now at least) there is only one primary and one alternative venue. It’s too early to draw any meaningful conclusions... Read More

The rain in Spain stays mainly on the BME

Interesting contrast last week where the LSE’s market share of the FTSE 100 fell definitively below 50% whilst at the same time BME’s market share in the IBEX 35 remained stubbornly close to 100%. Both markets are in Europe – check. Both are subject to the MiFID directive – check. Both have significant levels of liquidity – check. So what is going on? The difference... Read More

Market data and the prisoner’s dilemma

The prisoner’s dilemma is an aspect of game theory that shows why two individuals might not agree, even if it appears that it’s best to do so.  In its simplest version, two prisoners have to decide whether to assist or betray one another. If they co-operate then they both receive relatively light punishments, whereas a betrayal by one prisoner means that the other is severely... Read More

Divided we stand, united we fall

To say that it has been a turbulent time in global equities markets is something of an understatement, but the European picture provides some interesting pointers to the bigger geopolitical debate that’s going on. A couple of events in particular caught my attention. First, there was the ban on short-selling in banking stocks imposed by France, Italy, Spain and Belgium and the... Read More

European fragmentation in focus

It’s been interesting to watch the European MTFs jockeying for position over the summer. Seems like Chi-X is continuing to grow its market share of all European indices fairly steadily, whilst the relative market shares of Bats Europe and the LSE’s Turquoise could be starting to invert. This could possibly be down to Turquoise’s spangly new matching platform attracting the... Read More

Australia joins the global fragmentation movement

I was a guest last week to mark the opening of the Australian Liquidity Centre which is not, as you might think, the latest trendy Sydney nightspot. Instead it’s the name chosen by ASX for its impressive new co-location facility and represents the exchange’s latest move to meet the imminent opening up of equities trading Down Under. The transfer of market supervision from... Read More

Too close to call – er maybe not then

So the LSE/TMX deal is no more – it is deceased, it is an ex deal.  Last night the LSE broke off talks with Canada’s TMX group as it became obvious that their proposed merger was never going to get the required support of TMX shareholders.  So, if you include recent events in Australia,  the latest score is National Self Interest 2 – Common Sense nil.  So, what now... Read More

Too close to call? LSE v Maple Group

This week is supposed to be crunch time in Canada as investors in the TMX Group vote either to throw their lot in with the London Stock Exchange or retrench within their national borders and develop as the Maple Group. An article in the Financial Times today questioned whether either deal was actually a good one. On the one hand the Maple Group deal looks challenging as the new... Read More

A truly Canadian solution?

The merger mania in the exchange space took another twist last week when a consortium of Canada’s largest banks and pension funds put forward an alternative offer for TMX in an attempt to scupper the LSE Group’s own merger proposals with the Canadian exchange. There’s a clue to the consortium’s basic pitch in its name – the Maple Group – and the rhetoric from... Read More

The Great Game

I was the guest of DnB NOR in Oslo earlier this week where I participated in their Nordic Market Structure and Best Execution Summit. The event was well attended and included a number of significant buy-side firms. One of the themes that emerged was that liquidity demand seems to be consolidating into a smaller number of large investment firms whilst, conversely, liquidity supply... Read More


There were a couple of interesting pieces in the FT last week that looked at how the levels of HFT activity may be on the wane, both here in Europe and in the US (High-frequency boom time hits slowdown, Super-fast traders feel heat from competition). Whilst HFT activity is notoriously hard to measure, the FT points to data collated by Tabb Group which seem to show a definite reversal... Read More

National interest or political self-interest?

Few can have missed the announcement that the proposed merger between ASX and SGX is about to be halted by Wayne Swan, Australia’s Treasurer. He cites the deal as contrary to the national interest which, of course, has been a concern raised by the Canadian authorities in their review of the proposed merger between their own TMX Group and the London Stock Exchange. I wonder... Read More

Little and Large

Looks like Canada was a good place to pick as the venue for the first Fidessa Fragmentation Forum of 2011. Around 140 representatives from Canada’s financial community gathered together at the Toronto Stock Exchange’s HQ in Toronto to discuss fragmentation and Canada’s role in global financial markets. Naturally, much of the discussion focused on the news of a merger... Read More

The sound of the drums

It’s an interesting time to be a pan-European exchange operator like NYSE Euronext as it seems to be taking fire from all sides. As pointed out by FT Trading Room, the revamped Equiduct is now starting to nibble at NYSE Euronext’s Paris market share as Equiduct’s top ten stocks (by value) are now all French. Meanwhile the most recently formed MTF, TOM, is doing exactly the... Read More

Fragmentation Milanese style

I spent the first half of this week in Milan, as the guest of Assonime and Emittenti Titoli, debating trends in the European securities industry. What made the event especially interesting for me was that it brought together participants from both the trading community and those involved in issuing shares on capital markets. For those firms that are listed on public markets it seems... Read More

Chats, BIX, and the battle for Europe

Back in August last year rumours abounded of a tie-up between rival MTFs Chi-X and BATS Europe and, just before Christmas, it was confirmed that the two parties had now entered exclusive negotiations. This got me thinking about the true significance of such a deal and what it might mean for other MTF operators. The chart below shows the combined market share of the major European... Read More

Brussels spouts!

It used to be okay when Brussels’ euro meddling was limited to the banalities of life, but the remarks attributed to Kay Swinburne (Conservative MEP for Wales) yesterday seem to show a dangerous misunderstanding of how European financial markets work. The concept that dark pools are “always bad” is naive on a number of levels. Firstly, the term ‘dark pools’... Read More

Aussie rules OK

The latest of our fragmentation forums landed in Sydney last week where around 150 industry executives got together to debate Australia’s future in the global fragmentation experiment. The event was well timed as the Australian Regulator, ASIC, published its long awaited consultation paper outlining its proposed new rules governing equities trading on the very same day. The... Read More

Aussie rules

For anyone that doesn’t know, Aussie rules football is a highly physical contact sport that combines elements of rugby and football and is a major participant and spectator sport in Australia. One of the things that makes the game so interesting (and dangerous) is the absence of an offside rule which makes it very hard to predict where any likely ‘contact’ may come... Read More

Spain – your gateway to Latin America? – part 2

Following my previous post on Spain I received the following email from Bernardo Mariano at ERDesk which I reproduce here with his permission: I saw your article on Spain “Spain – your gateway to Latin America? – 8 October 2010” where you commented “Spain is a unique outlier in the global fragmentation ‘experiment’. Despite being part of Europe and subject to the MiFID... Read More

The 5% Theory

Interesting piece from Jeremy in the FT yesterday – LSE claims quickest trading speed – that describes the new low latency platform that went live on the LSE’s Turquoise MTF last week. Whilst Xavier is encouraging us all to admire the new go faster stripes on the platform, he also needs to worry about the fact that any alternative venue needs volume as well as... Read More

Spain – your gateway to Latin America?

It was Spain’s turn this week to host the latest in our series of global Fragmentation Forums. Around 50 of Spain’s top financial executives gathered at the Miguel Ángel hotel in Madrid to discuss and debate the future of Spain’s equity markets. Spain is a unique outlier in the global fragmentation ‘experiment’. Despite being part of Europe and subject to the... Read More

Deriving Equities Market Share

Last Friday, the 17th September, highlighted again the interrelationship between derivatives and equities in terms of fragmentation. The third Friday of the month is associated with futures and options expiration and so market participants close out positions with a resultant surge in volumes on the primary exchange. You can see this effect clearly in the US, Canada and London as... Read More

Chats or BIX Europe – the shape of things to come?

Few can have missed the reports that BATS Global Markets is believed to be in negotiations to buy Chi-X Europe. There is a certain logic for closer ties between the two as they both share a number of the same owners. The timing may also be significant as the fall-off in European volume will have affected the alternative venues far more (they typically run at around breakeven and... Read More

Can we FIX the consolidated tape?

I attended the FIX Protocol EMEA quarterly briefing yesterday evening and was asked to sit on a panel to discuss the impact of MiFID II, especially in light of the CESR recommendations that were published the same day. Whilst it was clear that some of my fellow panellists had had more chance than me to read and digest all 162 pages of the report, the thorny issue of having a consolidated... Read More

Can’t see the wood for the trees?

It is not always easy to get a clear understanding of what’s going on when confronted by large amounts of data. The usual solution to this is to step back in order to get some perspective and understand the bigger picture. The other approach is to zoom in on a small part of the detail and see if it is representative of the whole. Take a look at the FFI for Big Yellow Group,... Read More

Has the LSE turned the corner?

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... Read More

The Glittering Prize

Just as we were looking forward to World Cup fever beginning to assert its grip at Fidessa Towers, BATS Europe has reminded everyone that there are other prizes at stake this summer as it unveiled the latest addition to its smart routing capability. The new service is called BATS+ Primary and builds on the CYCLE and RECYCLE smart algos it already offers. The basic idea is that an... Read More

A Shot in the Dark

This week saw the announcement that six brokers are going to publish their dark pool volumes in a bid to improve transparency of non-lit trading in Europe. The report is published by Markit and is available here. Whilst the six firms involved should be applauded for taking these first steps towards greater transparency, the announcement still leaves a few questions unanswered. Firstly,... Read More

Liquid Refreshment

Firstly, thanks to Olof Neiglick and the Burgundy team for hosting an enlightening seminar on the state of liquidity fragmentation in the Nordics earlier this week. The sessions included presentations from brokers, vendors and clearers and helped highlight a number of issues facing the broking community as a whole and particularly in terms of dealing with fragmented liquidity. The... Read More


NASDAQ OMX confirmed this week that it will close NEURO, its London based MTF, at the end of next month. Given that it was backed by the mighty NASDAQ OMX why did it fail and is this the end of the MTF model as we know it? It didn’t help that NEURO launched at the height (depth) of the credit crisis, but it always seemed to struggle to develop a real identity of its own. Chi-X... Read More

Trading US Stocks European Style

Few can have missed the announcements from the LSE’s Turquoise and NYSE Arca Europe that they will each soon begin trading US stocks. Both venues will aim to attract the HFT/algo community which will be able to exploit differences in prices between these platforms and their US counterparts. On this point, the Turquoise plan is particularly aggressive as it will allow users to... Read More

Less haste more speed

Quite a lot has been written over recent weeks about the London Stock Exchange’s market share and last week helped to clarify some of the issues. Prior to this period the LSE had enjoyed a temporary boost in volumes driven by the triple witching hour on March 19th when many traders go to the LSE in order to cover their equity options positions. But this was just a small kink... Read More

Smart Routing: The Sat Nav of the Trading World

A couple of people have pointed out to me that the dial seems to be really moving now in terms of fragmentation across the Nordic region. A quick look shows that Stockholm’s share of the benchmark S30 index has now fallen to around 72% and that the FFI for the same index has shot up by 15% just since the beginning of the year. We’re also seeing a similar situation in... Read More

Freaky Fridays

A few of us here at Fidessa Towers have been wondering about the spiky path fragmentation has taken over the past year or so. Whilst the overriding trend is upwards there have been a number of times when the rate of fragmentation has suddenly dipped only to recover its upward trajectory the next day. This was particularly evident with the FTSE 100 last month where the LSE’s... Read More

Tick Tax

Just returned from a very stimulating week in Japan where I was asked to present on High Frequency Trading and global fragmentation at the Japan International Banking & Securities Systems Forum. There was a great point made by Chuck Chon, CTO of SBI Japannext, when he was asked how his alternative venue differentiated itself from the mighty TSE. Amongst other points, Chuck confirmed... Read More

Jumping the Queue for Order Flow

A couple of announcements have caught my eye over the past few days. This week saw the launch of a smart routing service called CYCLE from BATS Europe and, last week, I was at a seminar in Stockholm where Turquoise’s Adrian Farnham presented its own liquidity aggregation service – TQ Lens. Both of these announcements highlight how venues are starting to overlap with... Read More

Latency Wars – The Empire Strikes Back

Few can have missed the announcement this week that the LSE’s new low latency platform, Millennium Exchange, will be up and running in September. This comes just months after its acquisition of the Sri Lankan firm, Millennium IT, which supplies the technology and is testimony to the new thinking now taking place at the LSE. The same news item also mentions that the LSE has... Read More

The Luck of the Irish

Looks like it’s Ireland’s turn to run the gauntlet with the MTF community. Pretty much all the MTFs – Chi-X, BATS, NASDAQ OMX Europe and Turquoise – have announced that they will be trading Irish stocks from now on. For this reason we have now included the Irish Stock Exchange (ISE) and its accompanying index (ISEQ) on the FFI website. A quick look revealed that... Read More

The T Word

It was interesting to watch Andrew Bowley’s video interview on Finextra regarding the launch of Nomura’s dark pool – NX. It helped crystallise the love/hate relationship between dark pools and the T word – Transparency. Andrew Bowley made a good point about how the pursuit of MTF status for NX had been going on for a long time and wasn’t just a knee jerk reaction... Read More

Fragmentation Fever Goes East

Looks like 2010 is going to be a pretty interesting year in the battle for liquidity between the established exchanges and the more recently established MTFs and dark pools. It also looks like fragmentation fever is likely to spread eastward, too. This is being driven by a number of factors that include technology, regulation and commercial opportunism. The introduction this week... Read More

Happy Holidays

Now that everyone at Fidessa Towers is starting to wind down and prepare themselves for the Christmas break, I decided to look back at the predictions I made at the beginning of January 2009. As you can see from the table below, it looks like the FFI is a pretty good predictor of trends.   If the 2010 predictions are accurate you can expect the LSE’s market share in lit trading... Read More

Whose Liquidity Is it Anyway?

Two events this week crystallised the need for better pre- and post-trade information. Firstly, BATS joined ranks with Chi-X to question the LSE’s decision to set its market to auction mode during its recent outage. In a related white paper on the subject BATS also claims that “it is questionable whether the market was orderly on the LSE given publication of data which... Read More

Should I Stay or Should I Go?

Few can have missed the furore over the LSE outage yesterday. During the outage the MTFs made repeated attempts to convince the trading community that it should go and trade on them whilst the LSE was unavailable. The chart below, however, shows that they were pretty unsuccessful in this and that, instead, traders simply stayed away from the market altogether until trading resumed.... Read More

London Calling

There has been a lot of coverage of the LSE’s first half results this week. Most of the comment seems to focus on the erosion of its market share by the MTFs and whether the pricing of the MTFs is sustainable in the long term. Whilst there is little doubt that these are both valid areas for discussion, I wonder whether there are some more subtle issues involved. Firstly, it’s... Read More

MiFID hits Main Street

There was an interesting article in the FT yesterday about how IG Index (the spread betting company) will now be connecting to Chi-X and, I assume, other MTFs too. The story reminded me of how MiFID is starting to permeate outside the immediate professional trading community and enter the consciousness of the public at large.  My own experiences in this area have been mixed – ... Read More

The Emmental Enigma

Those of you that have followed this blog know that I have commented a few times on the impact on fragmentation when a primary market has been unavailable (see the croissant hypothesis and the bacon roll theory). Well, yesterday it was the turn of SIX Group to run the experiment. Due to a technical glitch, SIX was unable to provide prices on major Swiss stocks for a few hours yesterday... Read More

Monopolies Bad, MTFs are Good?

I was chatting with the guys at Fidessa Towers the other day about what constitutes the “right” business model for venues in the post MiFID environment.  It’s an interesting question, and one the European regulators seemed to completely ignore when they first introduced MiFID back in November 2007.  The evidence so far is uncertain.  MiFID has undoubtedly broken up the... Read More

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... Read More

The Bacon Roll Theory

I wrote a while ago about the impact on fragmentation caused by an outage at NYSE Euronext (see The Croissant Hypothesis, April 2009). Well, we had another chance to re-run the experiment here in London this week. Basically, what happened was that on Wednesday the LSE suspended trading in a small handful of stocks because of some technical glitch in part of its market data feed.... Read More

Fragmentation Diversifies

It’s hard to miss the widening gulf in fragmentation between the London Stock Exchange and the other primary markets. The gap started to appear during the summer but seems to have been widening to the point that fragmentation on FTSE 100 stocks is now around 30% higher than in France or Germany. NYSE Euronext and Deutsche Börse will doubtless be monitoring the London situation... Read More

Fragulation Fever

Firstly thanks to everyone who has emailed me with such positive responses to the Fragulator. Thousands of fragulations have taken place on the site since Friday and it’s great to know that so many of you are finding it useful. We’ve had all sorts of interesting feedback, especially in terms of the classifications we have chosen and the different levels of reporting... Read More

Turquoise, the LSE and the Fragulator

I was wondering the other day whether we might run out of space on the web site soon as more and more venues are created. Well, the good news is that Xavier Rolet and Eli Lederman may have helped us solve that problem (LSE in talks to buy Turquoise). Assuming that the proposed acquisition does indeed go ahead, it will be interesting to see how this will affect the trading landscape.... Read More

Somebody’s Watching You

Spent a busy few days travelling round the Nordics last week. The trip culminated in my participation in a debate hosted by John Lauritsen at the Copenhagen offices of Carnegie that pitched the mighty OMX exchange against Chi-X which has been stubbornly building its Nordic market share over the past few months. Given that up to 20% of some Nordic stocks are now regularly traded... Read More

Dark Forces

At the beginning of September, BATS Europe announced further extensions to its inverted pricing model to include FTSE 100 stocks. At the same time NASDAQ OMX Europe extended its aggressive rebates, too. The LSE’s approach to these pricing pressures was to abandon its own maker taker price list and revert to its wholesale discount model. This was widely seen as favouring the big... Read More

The Rise of the Micro MTF – Cheaper or Smarter?

It was great to spend some time in Stockholm last week and even better to get so much positive feedback on our new improved coverage of the Nordic region. When I got back, though, I noticed that a less well known MTF – QUOTE MTF – had announced that it had “gone live”. QUOTE MTF is backed by SwiftTrade and is representative of the new breed of micro MTFs that are... Read More

Nordic Makeover

I mentioned a while back that we were working to improve our coverage of the Nordic region and so it’s great to report that this work is now complete. As you can see, the most obvious addition is the inclusion of Burgundy. Speaking with Olof (Burgundy’s CEO) he told me that: “Multi-venue trading is new to the Nordic region so our participants are now deeply involved... Read More

How many MTFs?

Returned from my hols, refreshed and ready to face the start of the new season. The newswires have been awash with stories that Turquoise is exploring its “strategic options” by engaging UBS. Regardless of whether Turquoise is looking at an outright sale or some other, more subtle, form of partnership the story did set me thinking about a number of things. How would you go about... Read More

Y Viva España

Whilst packing my bags for my annual hols, I was thinking about the rates of fragmentation between different European countries. Most of Europe, especially the UK, Germany and France, seems to be following the same path with the notable exception of Spain. Stocks within all the major European indices are trading with an FFI approaching or exceeding 2, whereas Spanish stocks remain... Read More

Thinking in new ways – Part II

I wrote last week about how the LSE is planning on revitalising the corporate bond market with a special focus on making it simpler for retail investors to trade these instruments. This is part of its multi-faceted response to fragmentation which has seen the market share of the LSE and other primary exchanges severely eroded by the new MTF community. Part of the challenge these... Read More

Thinking in New Ways

As I’ve discussed before, the market disruption wrought by MiFID was bound to see a jostling for position between the established players and the new market entrants. For the primary venues this means overcoming the inertia associated with their old operating models whilst for the new guys the imperative is to create real momentum behind their brands. The FFI for the major European... Read More

A Shot in the Dark

Nice to see that BATS Europe has announced that it, too, is going to launch a dark pool service. While not too surprising, it is interesting to note that they will be offering a maker taker pricing model as this will be sure to extend the current price war into the dark arena as well. BATS joins a long list including Chi-X, Turquoise, NYFIX Euro Millennium, SmartPool, Pipeline,... Read More

Tick Size Fever

There has been much debate this week around the move to smaller tick sizes as Chi-X, Turquoise and BATS all announced that they will unilaterally reduce tick sizes in the stocks most commonly traded on their platforms. This is in the belief that smaller tick sizes lead to tighter spreads and so will attract even more volume on to these MTFs. This move was taken ahead of the planned... Read More

Be careful what you wish for

It was great to see the success last week of the new “inverted” pricing model at BATS Europe. As a result, BATS weighed in with 6% of the CAC 40 and just over 4% of the DAX. Other MTFs were successful in Europe too and so, in just a week, the FFI of the CAC 40 and the DAX rose by 6% and 10% respectively and both have now reached convergence with what is happening in London.... Read More

Having your cake and eating it

The FFI clearly shows that fragmentation is steadily rising as smart routers continue to spread trading volume across different venues. Looking at last week’s data, though, I couldn’t find a single venue (primary or MTF) that wasn’t showing a decline in its overall volume for the week. Obviously the bank holiday and half term break affected the figures but this still highlights... Read More

The Broker Dealer Conundrum

Jeremy Grant’s article in the FT today, “Dark pools start evolving into brokerage operations”, points to something that is starting to be talked about with increasing vigour. This is the simple fact that, in the post-MiFID landscape, the roles of exchanges/MTFs and the broker dealers are starting to become almost interchangeable. The announcement that Turquoise has received... Read More

Last Mover Advantage

Last week was a good week for fragmentation. BATS continues to build on the impressive start it made last year and it was great to see that volumes at Turquoise are starting to get back to the levels (over 6% of the FTSE 100) it enjoyed before the end of the market making obligations. The last 6 weeks have also seen impressive growth in volumes at Chi-X. The fact that all of the... Read More

Nasdaq OMX and Burgundy make progress; LCH.Clearnet fights back

Great to see that volumes are on the rise at Nasdaq OMX. Whilst the total volumes are still quite small, the rate of increase is pretty impressive. Nasdaq OMX Weekly Turnover €bn Nasdaq OMX Market Share per Index It seems that a combination of ultra low cost and focus around targeting specific user groups (in this case, traders of the CAC40), is paying off. As a result, the... Read More

The Future Shape of Trading

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... Read More

The Croissant Hypothesis

It was interesting to read Jeremy Grant’s piece in today’s FT about the outage at NYSE Euronext yesterday. Somewhat counter-intuitively volume didn’t move to the MTFs but, according to Jeremy, traders simply “munched on their croissants” whilst the techs fixed the problem. This outage highlighted again the difference between the US and Europe where US volumes are much... Read More

Wacky Races

Just when we thought that the European Liquidity Race was possibly entering the final lap, there is a slew of new announcements and further incentives. Firstly, NEURO has announced that participants on its MTF will be entitled to purchase up to 1.3 million shares of common stock in NASDAQ OMX group, “provided they meet specified market share thresholds”. An unrelated report... Read More

The Colour of Money

It was a record day yesterday here at Fidessa Towers as 1000s of people logged on to look at the stats on Turquoise now that the liquidity agreements with its institutional backers have expired. The drop off in volumes is significant but it is worth digging a little deeper into the true cause and impact. Firstly, as Eli Lederman (Turquoise’s CEO) points out “it was an... Read More

Trading Places Part II

Thanks to Charlotte Crosswell, CEO NASDAQ OMX Europe, for her comments re my recent entry. With her permission, I include her comments in full below: “NASDAQ OMX Europe sees the next twelve months as a period of immense opportunity. The immediate term will bring uncertainty for other MTFs and customers will be looking for a stable platform with a clear strategy for the future. NASDAQ... Read More

NYSE Arca Europe is Launched

This week sees the launch of another MTF – NYSE Arca Europe. Its claim to fame is that it offers low latency and low fees and that it enables its customers to leverage the existing infrastructure of NYSE Euronext. The devil though, as the say, is in the detail. No one can dispute the low fees (.15 basis point flat fee) but latency is notoriously difficult to compare between venues.... Read More

Trading Places

Few can have missed the news that Peter Randall will be leaving Chi-X. Whatever the reasons for his departure, Peter has proven that it really is possible to break the mould in our industry and he should be credited with this achievement. He has always been able to talk about MiFID and fragmentation in an entertaining way and backs up his colourful analogies with hard statistics.... Read More

A View from Turquoise

Thanks to Eli Lederman, CEO of Turquoise, for responding to my recent entry (The Big Bang Theory). With his permission I have included his comments below: “A little confused…Turquoise cut its fees because we can: we operate a diversified (and diversifying) business with an integrated lit and dark market. Seems to be what, in the next paragraph, you characterize as “the... Read More

European Top Twenty

I was visiting our American cousins in NY last week, but it was great to see the new weekly format FFI and the spangly “Top of the Pops” style list of the most fragmented stocks across Europe. It’s interesting to note that 15 of the top 20 are London based, although you can see from the graphs that fragmentation in mainland Europe seems to be accelerating too. Anyway, thanks... Read More

The Big Bang Theory

A number of separate announcements caught my eye this week. The first was the announcement that Turquoise is to cut its trading fees (Turquoise announces enhanced rebate programme). Of course, the promise of lower fees was the poster child for MTFs when they launched last year, but I wonder what the “right” price for providing a market to trade shares should be. NASDAQ OMX Europe... Read More

Turquoise and the Tale of Tape

Congratulations to Eli and Turquoise on concluding their recent round of fund raising successfully (as reported by Jeremy Grant in today’s FT). The fact that the money was raised from existing shareholders is testimony to these firms’ determination to keep the pressure on the traditional venues and, at the same time, have some skin in the game as the new, post MiFID landscape... Read More

Fragmentation trends provoke comment

There have been a number of articles recently (Jostling for Market Share, FTSE Global Markets – January/February 2009; European exchanges and MTFs squeezed by falling deal volumes, Financial News – 12 January 2009; and Chi-X braces for 2009 with £12m in fresh funds, FT.Com – 28 December 2008, among others) which have included references to the trends in fragmentation.... Read More

Welcome Back!

First day back at school today – thought it might be a good (dangerous?) idea to try and make some predictions about what we will see in the world of fragmentation through 2009. In the six months since we have been putting the numbers together, the FFI on the FTSE 100 has risen by 0.8 on the CAC 40 and by 0.3 on the DAX indices. Applying a strictly linear extrapolation of... Read More

The price is right

I was reading about the ‘MTF effect’ on Finextra this morning (see http://www.finextra.com/fullstory.asp?id=19416). This article echoed some of the themes from the recent TradeTech Liquidity event about the price improvements that can be enjoyed in the new MTF world. I expect that SOR vendors will soon start waving around their own statistics that show how their brand... Read More

FFI extends into the 250

Thanks to the Xmas elves at Fidessa Labs working overtime, we now include coverage of the FTSE 250 which many of you have requested via email. Having had a quick look this morning it’s interesting to see that Chi-X is making a big dent in the 250 (as well as the FTSE 100) and that, whilst their numbers are relatively low, BATS and Nasdaq OMX are beating Turquoise into 4th... Read More

Turquoise breaks into double figures

Last Friday, Turquoise achieved over 10% market share in four FTSE 100 stocks – Wolsey, Tesco, Drax and Kingfisher. Interestingly, Chi-X had a good slice of these stocks too and so it looks like the first hard evidence is emerging that some FTSE 100 stocks will fragment substantially over multiple MTFs. Most significant was that nearly 40% of Kingfisher (FFI 2.17) was traded... Read More

Fragmentation fever

A number of people have asked me about Markit’s launch of its fragmentation analysis (see http://www.finextra.com/fullstory.asp?id=19393). Reading this it seems that Markit has a different (although still valuable) objective from our own. To quote: “The service ranks brokers on each European trading venue, stock or index according to the volume and value of their trades”.... Read More

How smart is your router?

We’ve been chatting with a number of MTFs this week about their dependence on smart order routing technology to attract liquidity to their venues. All SOR systems basically work the same way. First, they scan the ever growing number of venues so as to create a virtual market of what’s out there, and then they decide where and how to break up the flow between those venues. As... Read More

Equiduct and Turquoise step forward

Interesting to see the advertisements in the FT today for Equiduct’s VBBO. Basically, the concept is that Equiduct will provide a real-time feed that shows how much better an execution could be if all the alternative trading venues were taken into account. This is a positive step towards a “consolidated tape” although, as with all things in the world of fragmentation, the... Read More

FFI rebalanced

Glad to see that whilst I was enjoying a welcome Thanksgiving break the boys at Fidessa Labs were busy re-calculating the FFI to better reflect dual listed stocks (see The Great Dexia Debate – a resolution). As you can see from the revised data, in first place is the FTSE 100 (FFI 1.55) followed by the respective indices of Amsterdam (FFI 1.45), Paris (FFI 1.34) and then Germany... Read More

The plot thickens

Interesting day yesterday in the ever-changing world of fragmentation. During the MTF v Traditional Exchanges debate at TradeTech Liquidity it seemed like there were two strategies emerging. The big primary markets are trying to leverage their distribution and multi-asset capabilities whilst the smaller, more nimble, MTFs are looking to focus around specific areas of the European... Read More

VWAP is dead – long live FWAP

I have been having all sorts of conversations with people about different ways that the FFI might be used. One such area concerns how fragmentation distorts common trading benchmarks such as Volume Weighted Average Price (VWAP). This is commonly used to measure a broker’s ability to execute a large block of shares over the day without impacting the market price of the stock concerned.... Read More

20,000 Hits – Wow!

Today marks the end of the first week for the FFI. The response we’ve had since its launch has exceeded even our most optimistic expectations and so thanks to everyone who has been involved in making it happen. It is very rewarding to be a part of something that really seems to have captured people’s attention and imagination. We have had over 20,000 hits on the site this week... Read More

Think I’ll do my Xmas shopping at PLUS Markets this year

Yesterday, while looking at the PLUS Markets website I noticed that they are now advertising mobile phones and coffee makers. (Check it out at http://www.plusmarketsgroup.com/PLUS_myplus.shtml). When I wrote yesterday that the trading landscape was still to undergo fundamental change I didn’t think that alternative venues would be diversifying into the household goods market... Read More

BATS Gets its First Slice of the FTSE Pie

One of the great things about fragmentation is that there are no clear answers, although I have to admit it can make achieving consensus quite difficult at times. Thanks to all the input we’re getting, the Great Dexia Debate continues to rage internally within Fidessa and I almost felt the need to use the baseball bat kindly given to me by BATS Europe to help express my own... Read More

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... Read More

Steady Start for BATS and Nasdaq OMX but LSE still needs to be worried

Now that BATS and Nasdaq OMX Europe have been operational for a short while, it looks like they still have a bit of work to do before they can get into the same league as a Chi-X and Turquoise. Both BATS and Nasdaq OMX Europe, however, have yet to extend their stock coverage fully and they have a number of firms waiting to be connected to their platforms. Sage Market Share But if... Read More

MTF Price War Hots Up 2

Interesting to read Jeremy Grant’s piece in the FT today about the LSE charging 1 basis point on any trade that arrives from an external trading venue such as Nasdaq OM Europe. This will also apply to BATS Europe and other MTFs when they make similar onward routing services available from their platforms next year. Nasdaq has previously branded this move by the LSE as uncompetitive,... Read More

5 FTSE 100 stocks break the FFI 2 barrier

Yesterday 5 FTSE 100 stocks broke through the statistically significant barrier of having an FFI of 2 or above – these stocks were Sage Group (FFI 2.28), Johnson Matthey (FFI 2.14), AB Food (FFI 2.13), 3I Group (2.12) and Standard Life (2.11) which seems to show that no one sector is necessarily fragmenting quicker than any other. The beneficiaries were, of course, Chi-X and... Read More

MTF Price War Hots Up

NASDAQ OMX Europe has taken the lead by setting out the most aggressive pricing policy yet.  By offering a .25 bps rebate for posting liquidity (maker) and a .25bps fee for removing liquidity (taker) – it looks like NASDAQ is getting ready for a war of attrition.  It will be interesting to see how the other MTFs react.  This comes not too long after the LSE introduced its... Read More

MTF’s can’t make decisions on new symbology by themselves

Interesting to see that MTFs ( BATS, Chi- X and Nasdaq Europe) are going to be creating a steering group to agree a common symbology. This initiative goes hand in hand with the drive to produce a consolidated tape of prices so that MTFs ( and some brokers’ SOR technology) are not dependent upon primary exchanges for reference prices. The aim is to “reduce the back office complexities”... Read More

Fragmentation goes down when volatility goes up?

Looking at the FFI over the past week or so shows that when markets get highly volatile (as has been the case recently) then volumes on alternative venues like Chi-X and Turquoise seem to go down. This inverse correlation may be down to a couple of reasons. The first is that in times of market stress, traders would rather deal on venues that have an established pedigree in the... Read More

Good week for LSE and Chi-X but LSE domination of FTSE 100 looks unlikely

It was a crazy week for markets last week but it looks like the beneficiaries in terms of venues were Chi-X and the LSE at the expense of Turquoise. I guess that’s a reflection that Chi-X is now seen as an established venue (alongside the LSE) whilst Turquoise has still to prove itself. It may also reflect the fact that that Turquoise’s members have had other things on their... Read More

Making Sense of Fragmentation

Welcome to the world of fragmented liquidity. 18 months ago few of us realised just how disruptive MiFID was going to be on the structure of financial markets.  This site aims to provide a forum to understand these changes and provide an evolving consensus within the Fidessa community on the impact of current changes.  It will also look forward to the next wave of changes and... Read More

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