Bats: “Absolutely enough liquidity for price formation”
First Published Monday, 21 December 2009 from Automated Trader
Paul O’Donnell, COO BATS Europe, explains that the MTF’s are already credible price formation venues and that the recent LSE outages serve to highlight that.
Last month's outages at the London Stock Exchange sparked a flurry of activity at the MTF's, with both Chi-X and BATS citing the outages as firm evidence that the MTF's liquidity flows are now sufficient to sustain an orderly market with or without the LSE, and specifically that they're now viable price dicovery venue's in their own right. Seeking to substantiate these claims, BATS recently produced their own white paper outlining their analysis of the liquidity patterns observed while the primary market was down. Automated Trader's David Dungay caught up with the author of BATS' white paper, Paul O'Donnell, COO of BATS Europe.
Paul, do you think the MTFs have moved past their role as an arbitrage venue? Your report highlighted some very interesting statistics.
Yes I think the evidence is quite clear when you look at what happened on November 9th. We didn’t actually publish the same level of detail but if you look at what happened on ING and Euronext a week or two before that, there was a very similar pattern. In an orderly transfer of a market after a shut down the MTFs absolutely have enough liquidity to sustain the market. In fact there are several FTSE stocks now where the LSE aren’t even the biggest player.
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