Now that everyone at Fidessa Towers is starting to wind

down and prepare themselves for the Christmas break, I decided to

look back at the predictions I made at the beginning of January

2009. As you can see from the table below, it looks like the FFI

is a pretty good predictor of trends.

href="http://fragmentation.fidessa.com/wp-content/uploads/predictions1.png"> src="http://fragmentation.fidessa.com/wp-content/uploads/predictions1.png"

alt="" title="predictions1" width="412" height="109"

class="alignnone size-full wp-image-995" />

If the 2010 predictions are accurate you can

expect the LSE's market share in lit trading of title="FTSE 100"

href="http://fragmentation.fidessa.com/stats/index/UKX.html"

target="_blank">FTSE 100 stocks to fall further from

its current level of around 60% to something like 40% by the end

of 2010 (excluding any volume from its imminent acquisition of

Turquoise or from the revamped Baikal). It's not all

bad for the LSE, however, as it has finally acquired enough

pieces on the board to take on both the MTF community and the

other primary European markets too. Its widely anticipated

acquisition of Turquoise will give it a pan-European MTF (already

equipped with live order flow) right from the get-go and title="LSE to offer futures on FTSE Index"

href="http://www.bloomberg.com/apps/news?pid=20601087&sid=aUyYFlTsh6gM&pos=7"

target="_blank">its decision to launch FTSE index

derivatives will challenge the other primaries'

derivatives markets as well. Xavier Rolet should be applauded for

getting the LSE to act quickly and let's hope that his

Christmas stocking is overflowing with the energy he'll

need to integrate such a wide array of different technology

platforms through 2010.

This is in contrast to

NYSE Euronext which has bet the ranch on its single UTP

infrastructure. If you read the adverts, UTP allows the trading

community to connect from anywhere and trade any asset class

within its network. This will be great when it's

finally complete but NYSE Euronext will still need to prove that

it can offer the best of all worlds rather than a compromise

between everything. This is particularly true in the multi-asset

space as the different nature of derivatives and equities trading

make it pretty hard to tune one single engine to be best of breed

at both. Meanwhile, Deutsche Börse has launched its own

pan-European market (XIM) as its first foray in the battle for

non-German liquidity in the equities space. Like the LSE, it will

also be

href="http://deutsche-boerse.com/dbag/dispatch/en/notescontent/gdb_navigation/press/10_Latest_Press_Releases/INTEGRATE/mr_pressreleases?notesDoc=4E1CA5170817677FC125768D004727C3&newstitle=eurextofurtherexpanditsequityo&location=press"

target="_blank">listing derivatives based on UK

stocks. Looks like the big boys have worked out where

the next battle is going to be fought. Unlike equities, however,

derivatives contracts are created and owned by the exchanges that

list them and so it's much harder to wrestle liquidity

away from the incumbent (NYSE Euronext Liffe).

Meanwhile, in MTF land, the prediction at the beginning

of the year was that we would see the number of viable

alternative platforms reduce to three. Over the past few months

Chi-X, BATS Europe and Turquoise seem to have comfortably filled

this space and trade between 15-20% of the FTSE 100 and other

primary indices such as the CAC 40 and DAX. Assuming that

Turquoise is acquired by the LSE then it looks like BATS and

Chi-X will be left to fight it out in the alternative venue space

together with NEURO (which is the only venue right now that also

offers a smart routing service alongside its matching

platform).

One of the predictions that didn't

seem so accurate concerned the impact of dark pools although, if

the volume traded on dark pools matched anything like the column

inches they receive, then perhaps things would be different. This

point was made at a Dark Pools debate organised by the title="CSFI" href="http://www.csfi.org.uk/"

target="_blank">Centre for the Study of Financial

Innovation on Tuesday where someone commented that if

dark pools had been given a more benign name (e.g. Added

Liquidity Venues) then maybe there would not be so much fuss

about them amongst the media and regulators. This is true but

only up to a point. Whilst the volumes in dark pools registered

as MTFs are still modest there has been a significant (34%)

upswing in other not-lit trading activity. This is where the

regulators really need to focus since it's increasingly

difficult for anybody to see exactly how and where this liquidity

is being traded.

Anyway, my thanks as always

to the guys at Fidessa Labs for all their hard work this year and

to everyone else who has participated in this site.

Happy Holidays - see you in January!