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 indices gives a few pointers as to the

results of these efforts. Whilst fragmentation continues its

inexorable rise across all the major indices - last week the FFI

for the FTSE100 breached 2 for the first time - it seems likely

that we will end up with a landscape that is pan-European in

nature rather than country specific. The data for title="Chi-X analysis"

href="http://fragmentation.fidessa.com/stats/exchange/CIX.html"

target="_blank">Chi-X and

href="http://fragmentation.fidessa.com/stats/exchange/BTE.html"

target="_blank">BATS seems to bear this out as their

respective Top Stocks by Weekly Turnover include stocks from

London, Paris, Frankfurt and Amsterdam.

href="http://fragmentation.fidessa.com/stats/exchange/TRQ.html"

target="_blank">Turquoise appears to buck this trend

as its "top ten" comprises either UK or Swiss listed stocks but,

nevertheless, the idea that a primary exchange has a divine right

to "own" the trading in its own country's stocks looks

increasingly likely to be a thing of the past.

To meet this challenge the primary exchanges are taking

a number of different approaches. They are creating their own

versions of the nimble, pan-European MTFs that have sprung up as

their competitors. NYSE Euronext has now launched NYSE Arca and

has signed 14 trading members to SmartPool, whilst the LSE has

successfully re-aligned and launched Baikal in just a few months

since the demise of its original partner, Lehmans.

The primaries have started to flex their muscles in

other areas, too. Exploiting their multi- and cross-asset

capabilities is an obvious way to increase the stakes. The LSE,

NYSE Euronext and Deutsche Börse all have capabilities in

the fixed income and derivatives arenas that the new MTFs will

find difficult to emulate, for two reasons. First, there is cost:

the MTF community is still focussed on proving the long-term

sustainability of their existing, equity focussed business

models. This means that strategic investment in adding new asset

classes looks hard for them at the moment. The second is that, at

least with derivatives, the exchanges actually do own the

contracts being traded and so it is much harder for newcomers to

wrestle liquidity in these instruments away from the

incumbents.

It was interesting, therefore, to

read Xavier Rolet's comments this week that the LSE plans to

launch a platform to make corporate bonds more easily accessible

to the UK retail market. This will build on the MOT fixed income

platform that came with its acquisition of Borsa Italiana in 2007

and is a great example of the new thinking that is emerging

within the primary exchanges.