MiFID 2 years later:Significant changes in the Liquidity Landscape

“Navigating Liquidity 3" - Crédit Agricole Cheuvreux's third research report on equity exchange liquidity

Paris - 13 October 2009 - Crédit Agricole Cheuvreux announces the publication of “Navigating Liquidity 3”, the third in its series of equity exchange liquidity reports. These reports provide a detailed analysis of the impact that MTFs (specifically Chi-X, Turquoise, BATS and Nasdaq-OMX) have had on market efficiency and the fragmentation of liquidity, as well as the challenge that they pose to the primary markets.

Recent significant changes in the liquidity landscape:

• CHI-X has become well established as the leading MTF and No. 3 execution venue in Europe. It continues to extend its influence in less liquid stocks.

• TURQUOISE has succeeded in recovering market share since March 2009 and has further developed its coverage of indices, its key strength. Its positive performance was also confirmed by the increase in its percentage of time at the EBBO. There are concerns about the future ownership and direction of Turquoise due to current discussions of a potential sale.

• BATS' inverted pricing had a major effect on its market share, which doubled on the CAC 40 in the space of two weeks. Taking into account market share, stock coverage and percentage of time at the EBBO, its best performance was in UK stocks.

• NASDAQ OMX has every chance of succeeding as a newcomer. By improving its bid-ask spread and BBO presence compared to others, it was immediately rewarded with an increase in market share.

• The MTFs' unique intra-day volume profiles tend to disappear. This can be attributed to more widespread use of SORs by investors. Conversely, slight differences at the opening and the close of market are likely to continue to exist as long as investors remain uninterested in using MTFs for fixing auctions.

“This report highlights the importance of identifying the market conditions that drive different execution venues to efficiently source liquidity. In our view, investors should consider using MTFs not only to take liquidity aggressively, but also when they act as liquidity providers. As a broker with recognised expertise in research and execution, CA Cheuvreux is able to monitor, record, analyse, and interpret the complexity of these markets,” said Ian Peacock, Global Head of Execution Services at CA Cheuvreux.