Liquidity fragmentation in Europe’s major equities indices continued in February, and became more noticeable in more indices, according to the February ‘Market Indicators’ report published by agency broker CA Cheuvreux in conjunction with transaction cost analysis provider TAG.
Cheuvreux and TAG observed an increase in the pace of fragmentation since the beginning of 2010. While the speed of fragmentation slowed to 2009 levels in February, the firms noted that the phenomenon had spread to the Belgian BEL20 index and the Swiss Leader Index (SLI). They added that the market shares of multilateral trading facilities Chi-X and BATS Europe in these indices surged in mid-January, and the February data confirmed the relevance of this increase. Chi-X’s share of the BEL20 increased to 19.8% in February from 17.9% in January, and its share of the SLI grew to 14.6% from 12.5% in January.
BATS Europe’s market share of the BEL20 increased to 3.3% in February from 2.7% in January, and its share of the SLI grew to 4.2% from 3.5%.
The February Market Indicators report shows that over the three months to the end of February 2010, most incumbent exchanges’ market share of their domestic indices had fallen and that the market share of Chi-X Europe, the continent’s largest displayed-order-book multilateral trading facility had risen.
However, while the London Stock Exchange’s market share of the FTSE 100 index has eroded more than its peers’ share of their respective domestic large-cap indices – its February market share was 60.9%, while its peers’ shares were all above 70% – the LSE’s market share erosion appears to have halted for now. Although Chi-X’s market share of the UK blue-chip index rose over the three months to the end of February, the LSE’s three-month market share trend was flat.
The Market Indicators report also noted that the LSE had “outperformed” in terms of its percentage of time at the European best bid and offer (EBBO) for FTSE 100 stocks, which increased to 60% in February from 55% in January. However, Chi-X Europe was still ahead of the LSE in this measure – its time at the EBBO for FTSE 100 stocks was 64% in February, up from 58% in January. BATS Europe’s time at the FTSE 100 EBBO also increased to 42% from 36%. According the report, the increase in time at the EBBO for these venues is a sign that competition is becoming more intense.
Total European equities trading turnover increased to €1.3 trillion in February 2010 from €1.2 trillion in January 2010 and €952.5 billion in February 2009, according to figures from data vendor Thomson Reuters. Volumes increased to 206.0 billion shares in February 2010 from 181.3 billion in January 2010 and 146.2 billion in February 2009.
On-order-book trading enjoyed a small increase in value market share in February to 52.1% from 51.0% in January, while dark pools’ market share dipped slightly to 1.02% from 1.03% and the market share of over-the-counter reported trades fell to 32.4% from 33.2%.