Fewer trading platforms would still deliver competition, says Chi-X

Europe should have just three to five major trading platforms to “deliver economies of scale and maintain competition,” according to Chi-X Europe, a major player in the trading landscape.

Denzil Jenkins, Chi-X’s director of regulation, said: “Europe has traditionally been very fragmented, and there is a need to create a pan-European market. Inter-operability in the central clearing space is key to achieving this”.

His words, delivered at the TradeTech Europe event this week, seemed to reflect sentiment in a study published by Oliver Wyman and Morgan Stanley in February.

It noted in Europe “competition and commoditisation have shrunk [exchanges’] revenues by 15% since 2008. Cost synergies – historically 10% to 15% – provide a clear logic for [M&A] deals.”

Jenkins spoke as Deutsche Boerse, one of Europe’s leading exchanges, seeks to expand globally by merging with the NYSE Euronext.

Exchanges have become a hot topic in finance recently with a flurry of proposed M&A, and regulators looking to understand the effects of high frequency trading conducted through them.

A lack of data is the main barrier to the European Securities and Markets Authority analysing the effects of such trading, said Tim Rowe from the UK Financial Services Authority.

ESMA, the central body harmonising regulation across Europe, has sent questionnaires to the industry, and is aiming to release a consultation paper on the activity in due course, but Rowe said “currently this space is diverse and sparse in centralised data”.

John Greenan, BNP Paribas’ global multi-asset connectivity manager, said: “At the high level the SEC is continuing to discuss which direction new rules on high-frequency trades should take, while in Europe there are regulations such as MiFID II.”

He said regulators “have not yet made any statements, but continue to ask a lot of questions to the various market participants. It does not seem possible in this current climate to have a rigorous and in-depth debate.

“Policy makers will draw a line in the sand and everyone will have to fit around that. One of the issues is that the desire to regulate has increased massively since 2008, changing how people are viewing this space.”

David Walker

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