Few can have missed the furore over the title="Unpacking the LSE's outage"

href="http://www.ft.com/cms/s/61718dc2-db49-11de-9023-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F61718dc2-db49-11de-9023-00144feabdc0.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fmarkets%2Ftrading-room"

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"

src="http://fragmentation.fidessa.com/wp-content/uploads/ftsechart.png"

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

trading.

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

equities trading.