Last Mover Advantage - 12th May 2009
First Published Monday, 20th July 2009 08:16 pm from Fidessa : Fidessa
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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
have an FFI of around 2 or above is further evidence of the
increasing rate of fragmentation.
amongst all this data I was intrigued to see that fragmentation
of FTSE 250 stocks seems to be accelerating, too.
href="http://fragmentation.fidessa.com/wp-content/uploads/ftse-250-end-8-may1.png"> class="alignleft size-full wp-image-622" title="FTSE 250 FFI"
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This is especially significant as the small/mid-tier
broker dealers (many of whom tend to specialise in these stocks)
have largely been able to watch fragmentation from the side
lines. It looks as if this is changing now and so these firms may
need to be beefing up their SOR capabilities quicker than they
Having said all
of this, the big primary venues have now had the chance to
assimilate all the different initiatives underway within the MTF
community and so should have a good grasp of what works and why.
In this regard there may, paradoxically, be an advantage in going
last especially as the European trading landscape is now in much
better focus. Nowhere is this more true than in trading dark
liquidity. The MTF community has been working hard on creating a
variety of different dark pools and the announcements of "point
to point" sharing of dark liquidity by the large broker dealers
seem more opportunistic than strategic. To my mind, the stage is
set for an MTF, broker dealer or a primary venue to totally
dominate this space. It is estimated that anywhere up to half of
European liquidity is traded away from lit platforms and so the
rewards for success in this area look pretty significant. Maybe
what we have seen so far, then, has just been the prelude to the
real battle for European liquidity.