Paris, France
18 June 2007 Alternative
Trading Systems in European Equities
Report Published by Celent
Alternative trading systems in Europe will
struggle to increase trading volumes, despite catalysts such as MiFID. The
most likely scenario, in the near term, is that equity execution options
will increase, but little liquidity will be siphoned away from the
traditional exchanges.
The future of alternative trading systems (ATSs)
in Europe is not as bright as many market participants envision, even
though there are an increasing array of options for equities trading in
Europe outside the traditional exchanges. The consensus that ATS trading
will increase rapidly after the implementation of the Markets in Financial
Instruments Directive (MiFID) is overly optimistic, according to a new
report from Celent, Alternative Trading Systems in European Equities.
The European landscape is increasingly
populated with alternative trading systems (ATSs). The ATSs include a wide
assortment of parties: crossing networks, limit order books, request for
quote (RFQ) services, and even negociation tools. A number of dark
liquidity pools have come to Europe from the US, including ITG Posit and
Liquidnet. New, innovative limit order books that employ alternative
trading models include Instinet’s Chi-X in the UK, TradeCross's WETRA in
Germany, and the announced but yet to be fully defined Project Turquoise.
“To date, ATSs have had only a marginal
impact on equities trading in Europe,” says David
Easthope, senior analyst and coauthor of the report. “The presence
of mature, electronic limit order book systems at exchanges presents a
significant hurdle to ATSs wishing to penetrate the European market.”
While there have been numerous attempts to launch ATSs in the UK in
particular, and in Germany to a lesser extent, none of these attempts have
managed to attract significant order flow. By 2011, Celent predicts that
ATSs in Europe will have captured only 5% market share.
“MiFID is widely touted as the catalyst
to dramatically increased volumes on ATSs,” says Octavio
Marenzi, president and CEO of Celent and coauthor of the report. “However,
while MiFID does allow ATSs to establish themselves in countries with
concentration rules, the historical absence of concentration rules in the
UK and Germany has not allowed ATSs to flourish.” However, post-MiFID,
Celent expects ATSs’ proposition to be strengthened moderately in two
main areas: liquidity and anonymity. But before ATSs can start to garner
market share in Europe, they have a number of hurdles to overcome,
including the development of an operational system, connectivity to users,
clearing and settlement arrangements, and the attraction of liquidity.
The report is 41 pages and contains 13
figures and 6 tables. A table of contents is
available online.
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