There was an interesting href="http://www.ft.com/cms/s/0/4cc93b9a-d2d9-11de-af63-00144feabdc0.html?nclick_check=1">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 - I bought a bunch of

shares the other day and, on the spur of the moment, decided to

ask my broker what his best execution policy was and which venues

they had considered before executing my order. I was surprised

and disappointed with the response. My broker had only the

sketchiest knowledge of what best execution really meant and an

even hazier grasp of the different venues that have sprung up

since MiFID was introduced 2 years ago. Most alarming of all,

they seemed almost resentful that someone had dared ask "the

MiFID question".

Besides making a mental note

to find another broker, this experience set me thinking about how

far MiFID has (or has not) affected the retail trading community

across Europe. It depends where you look - Holland and, in

particular, Amsterdam seems to have always enjoyed a thriving

almost semi professional retail sector. Italy is similar, but the

rest of Europe doesn't have anything like as active a retail

audience. This divergence explains why several months ago one of

Europe's largest liquidity providers - Optiver - set up a joint

venture with Holland's Binck Bank called The Order Machine or TOM

for short. TOM dispenses with the need for an exchange altogether

as it allows retail order flow to interact directly with

Optiver's market making capabilities to the benefit of both the

retail trader and Optiver themselves. It will be interesting to

see if this is just a Dutch phenomenon or a pointer to the future

of equity trading across Europe. If it is the latter, then we may

see this model replicated as other Liquidity Providers build or

buy MTFs so as to interact with order flow in a similar

fashion.

Another dimension to this issue is

the level of understanding amongst corporate brokers and main

board directors of exactly how (and where) the stock of the firms

they represent is trading.

In the simple

pre-MiFID days you need only to look at the trade feeds from the

LSE or other primary exchanges to get a good idea of the on and

off exchange activity in your stock. It's pretty different now.

Take href="http://fragmentation.fidessa.com/fragulator/?fim=IMT.L">Imperial

Tobacco for example - 18 months ago the trading of this

stock was split mainly between the LSE and Chi-X. Last week it

traded on over 12 separate lit and dark venues and each of these

achieved a different VWAP. Also interesting is the average trade

size which, aside from Liquid Net, was broadly comparable between

the lit and dark arenas. This is of more than just academic

interest as this breakdown will influence which executing broker

you use and, ultimately, what kind of price you should expect to

pay or receive. (You can see this for yourselves if you log in

and use the new forwards/backwards buttons on the

Fragulator)

Anyway, next time you buy or sell

shares, don't forget to ask your broker the MiFID

question.