Firstly, thanks to Olof Neiglick and the Burgundy team for hosting an enlightening seminar on the state of liquidity fragmentation in the Nordics earlier this week. The sessions included presentations from brokers, vendors and clearers and helped highlight a number of issues facing the broking community as a whole and particularly in terms of dealing with fragmented liquidity. The first point is that, in terms of SOR, it's now a question of "how" to implement it rather than "if". Robert Barnes, head of market structures at UBS for the past five years and recently named chief executive of its new European dark pool, made an excellent case for how large brokers can take the pain away in terms of cost and complexity by allowing other brokers to reuse their smart technology to access the myriad pools of liquidity that now exist across the lit-dark spectrum. This makes perfect sense for some firms provided that they can demonstrate their own value-add on the trading food chain and can be clear about whether they are trading with or through these larger brokers. Other technology vendors made the alternative case for buying in third party technology. This is probably the only other viable alternative as the market is changing so fast that the "roll your own" option is simply unaffordable for all but the largest players. The sentiment, however, seemed to be that any such third party option needs to fully respect the entire (fragmented) workflow involved and not just chop orders up and ping them out to different venues.
On this point, the chaps back at the lab have now added the EURO STOXX 50 Index into the Fragulator (thanks to Malcolm Ford for his useful suggestion on this). If this is any kind of proxy as to how other national indices are going to end up then life is going to get a lot more complicated for us all. I started trying to add up all the different potential paths an order might take (including clearing and settlement) over the 35 different venues but soon gave up - might make a good idea for a competition?
Anyway, it was a great event in Copenhagen and the tour and dinner at the nearby Carlsberg Brewery proved an ideal opportunity to refresh ourselves on a similarly dazzling array of liquidity.