Should I Stay or Should I Go? – 27 November 2009
First Published Saturday, 28th November 2009 07:19 pm from Fidessa : Fidessa
The opinions expressed by this blogger and those providing comments are theirs alone, this does not reflect the opinion of Automated Trader or any employee thereof. Automated Trader is not responsible for the accuracy of any of the information supplied by this article.
Few can have missed the furore over the title="Unpacking the LSE's outage"
target="_blank">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. This shows that, in London at least,
traders are still reluctant to use MTFs without the comfort of
knowing that the primary market is open at the same time. Market
makers, too, are reluctant to make prices when the primary is
down and so this further encouraged traders to stay at home
rather than go and play on the MTFs.
href="http://fragmentation.fidessa.com/wp-content/uploads/ftsechart.png"> class="alignnone size-medium wp-image-960" title="ftsechart"
alt="" width="527" height="368" />
Another factor in play this time, though, was
technology. The majority of smart routers are (correctly)
configured so as to direct all orders to a primary market when it
is in auction. During yesterday's glitch, however, the
LSE put its market into auction which had the effect of creating
an "artificial auction" that sucked up
available liquidity from smart routers. This then led to the huge
spike in trading on the LSE when it reopened at 2 pm. The net
result was that LSE market share jumped by 7% compared with its
daily average for the rest of November. This last point
highlights, yet again, the ironic interplay in the post-MiFID
world whereby the MTF community is still dependent on the LSE
being open in order to try and increase its own share of UK stock
Finally, as some of you may have
guessed, it's been "Clash week" here at
Fidessa Towers. For those that don't know, The Clash were
pioneers of punk rock in London during the 70s. Their aim,
together with other similar bands, was to disrupt the hegemony of
the established music industry. Only time will tell whether the
MTFs will be as successful in changing the face of European