Chats or BIX Europe – the shape of things to come? – 26 August 2010
First Published Thursday, 26th August 2010 02:05 pm from Fidessa : Steve Grob
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 reports that
target="_blank">BATS Global Markets is believed to be in
negotiations to buy Chi-X Europe. There is a certain
logic for closer ties between the two as they both share a number
of the same owners. The timing may also be significant as the
fall-off in European volume will have affected the alternative
venues far more (they typically run at around breakeven and so
are more sensitive to overall declines in market
volume).
href="http://fragmentation.fidessa.com/stats/exchange/BTE.html"
href="http://fragmentation.fidessa.com/stats/exchange/CIX.html"
target="_blank">Chi-X were responsible for matching
href="http://fragmentation.fidessa.com/stats/index/UKX.html"
target="_blank">FTSE 100 last week (excluding
non-lit trading such as OTC Dark Pools and SI). This would
represent a sizeable pool of liquidity with which to continue the
href="http://fragmentation.fidessa.com/stats/exchange/LSE.html"
target="_blank">LSE. A combined entity would also
href="http://fragmentation.fidessa.com/stats/index/CAC40.html"
href="http://fragmentation.fidessa.com/stats/index/DAX.html"
target="_blank">DAX, too. With this sort of market
share - and assuming it maintained its low cost base -
the combined entity would surely have "crossed the
chasm" into profitability and sustainability. It would
href="http://www.chi-x.com/home/home.asp"
target="_blank">Chi-X's claim to be the
"largest pan-European equities
exchange".
href="http://www.londonstockexchange.com/"
target="_blank">Deutsche Börse and title="NYSE Euronext" href="http://www.euronext.com/"
target="_blank">NYSE Euronext continue to prepare
for greater competition between themselves, they too may be
href="http://www.chi-x.com/home/home.asp"
href="http://www.batstrading.co.uk/"
target="_blank">BATS. Were this to happen, we would
almost be back to square one in the merry MiFID game because they
would then have bought back nearly all the liquidity that their
members had siphoned away onto alternative platforms.
Meanwhile, I am in Tokyo this week debating the future
of fragmentation here since last month's launch of
href="http://www.chi-x.asia/apac/jp/eng/"
target="_blank">Chi-X Japan (incidentally owned by
Chi-X Global not Chi-X Europe). Obviously it's very early days
and there are still some regulatory obstacles to overcome before
the playing field is level (such as allowing the PTSs the same
short selling privileges that the
target="_blank">Tokyo Stock Exchange enjoys).
Nevertheless, interest in what
href="http://www.chi-x.asia/apac/jp/eng/"
target="_blank">Chi-X Japan and others (including
href="http://www.sbigroup.co.jp/english/company/group/sbijapannext.html"
target="_blank">SBI Japannext and title="kabu.com" href="http://www.kabu.com/"
target="_blank">kabu.com) are doing is huge and we
are already seeing a number of brokerage firms claiming
significant price improvements by utilising SOR
technology.
Unlike Europe there is no
MiFID-style mandate for best execution in that region and so
market forces will be free to shape the relationship between the
sell-side and the buy-side. Many market participants, however,
are looking to leverage their technology investment in
fragmentation from other geographies here too. It will be
interesting to see how quickly these fragmentation tools are
deployed in Japan (and the rest of Asia) and compare what happens
with other countries around the world.
