Venues focus on Spain as market volume doubles

Competition among venues is heating up in Spain as the country almost doubled its trading volumes over the past 12 months.

Competition among venues is heating up in Spain as the country almost doubled its trading volumes over the past 12 months.

Though Spain has long been one of the most difficult to access market in Europe, the lifting of a short-selling ban in January this year and moves by the primary exchange and pan-European multilateral trading facilities (MTFs) have helped make it one of the fastest growing markets in Europe.

Between November 2012 and November 2013, total value traded in Spain grew by 98.4% from €22.17 billion to €44 billion, according to Thompson Reuters Equity Market Share Reporter. Over the same period, total European trading volume increased by 12.6%, showing Spain is well ahead of the curve.

The MTFs have perhaps benefited the most from the changes in Spanish market structure, with BATS Chi-X Europe growing its November trading volumes from €996 million in 2012 to €6.8 billion last month.

CEO Mark Hemsley said the Spanish market is particularly important for BATS because it enables it to offer trading in all of the stocks that form one of Europe’s major benchmarks.

“Spain is a very important market for us – it’s one of Europe’s larger markets and holds six of the constituents of the Euro Stoxx 50. This means we’re the only platform with the liquidity that allows you to trade all of the Euro Stoxx 50 constituents, which in turn opens up a lot of derivatives hedging opportunities for members,” he said.

Robert Barnes, the recently appointed CEO of Turquoise, also highlighted the importance of the Spanish market in key benchmarks.

“If we look at the two key benchmarks which represent Europe, the FTSE Eurofirst 80 and Euro Stoxx 50, then there are six Spanish constituents in each, with weightings of more than 10% and more than 12% respectively, highlighting this is a hugely important market,” he explains.

Turquoise has also seen its trading volumes in Spain grow significantly, up over 300% from €227.3 million in November 2012 to €933 million last month. Market share more than doubled from 1.02% to 2.12% over the same period.

Last month, the London Stock Exchange Group-backed MTF also changed its clearing arrangements in the country following demand from members, switching from EuroCCP to EMCF, which is more widely used in Spain and should ease the post-trade process for market participants.

The growth of MTFs has hit market share for the country’s primary exchange, the Bolsas y Mercados Españoles (BME), which saw market share decline from 92.64% a year ago to 79.08% more recently. However, the huge growth in the Spanish market means traded volume on the primary exchange climbed 69% to €34.79 billion.

Recently, the BME has sought to compete with the influx of MTFs by relaxing its membership criteria. Previously, only local brokers could join the exchange and trading by foreign investors was usually done via a local intermediary. However, London-based brokers Citi, Deutsche Bank and UBS have joined the new trading, non-settling membership category. BME declined to comment.

While local firms have been worried about the influx of foreign firms and investment, Barnes believes this will ultimately be a good thing for the market.

“As our customers get more comfortable investing in Spain, the total size of the pie is growing and liquidity is improving, which is good for everyone.”

Hemsley also believes that recent developments will be positive for Spanish market participants: “Local brokers in Spain have been concerned about open access and foreign brokers encroaching on their territory but this [initiative] might help them. In the past, they would have to go via an international broker to trade outside of Spain but now with a single connection to us they can access stocks from across Europe on behalf of their clients.”