It’s interesting when you think of the “swings and roundabouts” of markets – everything moves in one direction for a few years, and then swings back in the other direction for another few years.  First there’s a trend towards centralisation, and then there’s a trend towards decentralisation, and then we’re off towards centralisation again.

ISD gave investment firms the ability to be remote members of all EU exchanges, and the big investment banks built their trading platforms in London.  TExchanges install the front-ends of their execution venues in London, to make it easier for firms to access.  Then latency becomes a recognised issue, and the front-ends of the investment banks' trading platforms have to be installed in close proximity to the exchanges around Europe in order to minimise that latency.  So we start to fragment technology. 

Then MiFID comes in and the investment banks can build their own execution venues, which they do in London because that’s now their primary trading centre. Then the issue comes that the people putting their order flow into these execution platforms have a latency differential: it takes longer to get their orders to London than it does to get them to their local exchange.

So maybe the investment banks will have to fragment their execution venues so that their front-ends are more closely located to the many sources of order flow across Europe (if you can’t bring the mountain to London, as it were).

And then investment firms across continental Europe may start to open up their own execution venues as well.  Local market participants might have choices between multiple execution venues, all of which offer local access and low latency.

The end-picture looks pretty fungal – like a map of the internet.  But of course, that could never happen – could it?