Exchanges in Europe recorded their highest cash equities turnover levels of 2009 in September, posting a 19.5% month-on-month increase, while multilateral trading facilities’ (MTFs) market share dipped slowly as overall activity rebounded.
According to figures from data vendor Thomson Reuters, turnover across European trading venues rocketed to €742 billion last month, compared with €598 billion in August 2009, the biggest increase since September 2008 when the fallout from the Lehman Brothers’ collapse sent equity trading through the roof. This year’s previous highest monthly turnover was recorded in June, when just over €630 billion was traded in Europe.
And although MTFs’ collective share of European equity trading fell slightly, to 18.75% in September from 19.57% in August, they continue to gain ground in London. Thomson Reuters data gives the London Stock Exchange (LSE) just 61.2% of trading in FTSE 100 stocks in September, compared with 63.28% in August. Moreover, the LSE’s market share has been below 60% every day so far this week. On 7 October, for example, the LSE claimed 57% of UK blue-chip activity, compared with Chi-X’s 23.8%.
The overall increase in European trading activity was felt by both MTFs and primary exchanges. Chi-X Europe reported its third best month since its launch in 2007, posting an 18% month-on-month increase in turnover to €86 billion. By comparison, Deutsche Börse traded €92.8 billion of equities in September, up from €73.9 billion in August, while the LSE recorded a 10% month-on-month increase in its average daily value traded to £4.4 billion from £4 billion in August.
These gains parallel a prolonged rise in European index values. For example, the FTSE 100 index finished September at 5,133.90 having started the month at 4,908.90, while France’s CAC 40 blue-chip index ended September at 3795.41 up from 3583.44 at the end of August.
Despite turnover sharp gains in September, any talk of a complete market recovery may be too soon.
“There is typically less market activity in the summer months of July and August, and although the sharp increases in September value traded are encouraging, overall equity trading flow remains substantially below pre-crisis levels,” said Richard Perrott, analyst at Sanford C. Bernstein. “In the near term, market comparisons versus last year remain difficult, but trading activity appears to have bottomed out in 2009, and I would expect activity to increase moderately from these levels.”
From January 2008 to July 2008, before the financial crisis took hold, the average monthly turnover of European equity trading was €1.047 trillion, according to the Thomson Reuters data. In the same period in 2009, average monthly turnover across Europe has been €596 billion.
Although it slumped to its lowest level of European market share (16.2%) in September since the introduction of MiFID in November 2007, the LSE remained the Europe’s largest exchange by turnover.
The LSE’s loss of market share in September can be attributed in part to a pricing promotion by MTF BATS Europe, which paid users a net rebate for trading UK stocks using a 50:50 passive/aggressive strategy. According to the latest European Liquidity Report from Citi, the LSE lost 1.3% of its FTSE 100 market share in September, while BATS made a 2.7% gain. LSE CEO Xavier Rolet also introduced a new pricing scheme at the start of September, which scrapped the maker-taker structure implemented in September 2008, a move that may have detracted some high-frequency firms trading on the exchange.
Pressure on the LSE’s market share may increase as Hungarian-based trading venue Quote MTF begins its UK stock rollout this Friday. However, the possible purchase of rival trading venue Turquoise announced last week, may help stall recent trends as the LSE embarks on longer-term initiatives to recapture market share.
Thomson Reuters’ figures comprise on-order book activity, dark trades and auction trades and include data from 42 exchanges, dark pools and MTFs across the European Union and Switzerland.