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The post-Mifid trading landscape: Review of 2010 and outlook for 2011
Crédit Agricole Cheuvreux publishes its December Market Indicators produced in conjunction with TAG. This month, CA Cheuvreux's market indicators include a broad review of 2010 and some key points for 2011:
- The primary markets continue to loose market shares throughout 2010 and fell below the 70% threshold on almost all indices
- Spreads tightened in 2010, with the exception of high-volatility periods. Chi-X's spread matched the primary markets in the last quarter of 2010 and even outperformed them on several occasions, on the same time BATS and Turquoise improved their spreads throughout the year, with BATS showing a better performance than Turquoise most of the time
- The LSE’s acquisition of Turquoise and the 2011 discussions between BATS and Chi-X are the first steps of the rise of pan-European platforms with around three main players offering a large range of products (lit books, hidden books, mid-points, smart routing) and an excess of niche offerings (BCNs, SI, etc.) from smaller players
- Nevertheless 2010 has not been a 100% good year: several outages such as the Flash Crash in the US on 6 May underlined the increasing operating risk for more and more competitive platforms, risk for which High Frequency Trading is partly responsible.
- The 2011 market microstructure needs more transparency, especially for post-trade data, and greater uniformity in the clearing and settlement space. Trading facilities should benefit from a clearer status (CA Cheuvreux supports the OTF proposal), and the cost of High Frequency Trading should be dealt by regulators, via ESMA, especially through tick size adjustments.
Please see attached document "Market Indicators December 2010" for more details.