Diary of an Investigation - Day one
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The LSE suffered another outage last week (LSE Statement). The same thing happened on 9th November. But these two are different. A few weeks ago the outage that occurred didn't stop trading across other venues. Traders were able to move their order flow via other platforms. This outage left the LSE defending claims by some that a dramatic shift has occurred in the space of the last few months, and the LSE's dominance as the UK's prime execution venue has now been neutered by the MTFs. The outage that occurred on Thursday of last week was different as the LSE decided not to stop trading in its stocks and put the market in "auction mode". Smart Order Routers are configured to route flow to the primary exchange during an auction and several market participants were not able to trade on other platforms as a result. Some may think this was a clever move by the LSE but the MTF community may not see it in the same way!
What's changed? There's a follow-up here to my Europe in Pieces feature in the Q4 print edition (Note: Xavier Rolet has just announced a drop in pre-tax profits. Just how severe is their loss of market share to rival venues?)
Possible questions for interview. Have the MTF's now moved well beyond the bitpart role of simple arbitrage venues? Has the LSE now lost it's mantle as the only reliable price discovery source? Are we finally seeing a change in mindset within the trading community? If the answer to these questions is "yes", then what does that mean for the future, and how will the LSE respond?
We'll be finding out over the coming days with a full analysis and interviews, as we separate the fact from the fiction and analyse the claims and counter-claims that have been circulating the market in recent days.