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  • 2011/07/26
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Financial operators under pressure: A month of outages in June

Crédit Agricole Cheuvreux publishes its June Market Indicators, produced in conjunction with TAG. While relatively few outages had occurred in the previous few years, June saw five of them. Trading behaves differently during outages, whether a primary market or an MTF is affected. This highlights the technology challenges currently faced by financial operators.
A month of outages
Five outages occurred in June: Chi-X on 13 and 15 June, and NYSE Euronext on 20, 21 and 27 June. Three conclusions have been drawn as a result:
• When Chi-X stops, trading mainly shifts to the primary market.
• After a stop, it takes time for the MTF to recover its usual market share. On the contrary, a stop for a primary market leads to an abrupt peak in volumes as soon as trading restarts.
• When the primary market suffers an outage, trading slows down significantly during the outage (-95%). The primary market shows a slight decrease in its market share for the whole day.
Worldwide mergers back in the spotlight
The UK Office of Fair Trading has referred Chi-X Europe and BATS's merger to the Competition Commission. The commission will give a ruling on the deal by 2 December. This is an unexpected delay for the two venues’ merger. It also postpones Chi-X's effective technology integration until early 2012.
LSE has withdrawn its offer for Canada’s TMX, as only a simple majority of shareholders voted in favour of the move, not the required two-thirds majority.

June figures
Visible and dark trading volumes on European Local Main Indices (LMIs) were slightly lower than in May, but dark market shares generally increased.
The triple witching day on 17 June generated particularly high volumes.
The auction liquidity indicator returned to an upward trend.
Spreads decreased on almost every venue and every index, despite higher volatility.
Market shares showed the convergence of Turquoise and BATS to the 6% threshold on European LMIs. In fact, Turquoise improved significantly on every index, while BATS fell sharply over the past few weeks.
Turquoise is also the only destination to have better EBBO figures than in May on all indices.
Chi-X had a mixed performance, while primary markets were either stable or decreasing.
Future trends
BATS will be the first MTF to provide clearing choices to its users as of 29 July. We might notice the effects of this change on volumes in market indicators for August.

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