Happy Holidays – 17 December 2009
First Published Thursday, 17th December 2009 03:06 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.
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.
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"
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"
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
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
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!