24 May 2018
John Cant

John Cant

John Cant - MPI Europe Ltd

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A place to discuss MiFID

Polarisation, not extinction - the future exchanges

28 January 2008  |  4747 views  |  0

With thoughts switching from MiFID compliance to the post MiFID impact on markets, here is a brief summary of some research on the probable impact on smaller European equity markets.

The traditional view is that with MiFID small national exchanges will cease to exist as they will be wiped out by the major exchanges/MTFs that MiFID facilitates. However, from our research we believe this over simplistic view overlooks the liquidity and size of some of the equity issues that these exchanges currently handle, as well as some of the services they provide. A more realistic scenario is for polarisation, rather than extinction. To explain what we mean by polarisation in this context, it is where the most liquid stocks graduate to the European “super-league” as they are viable to be quoted and traded on the pan-european exchanges. It is likely, but not necessary, that the “super-league” equities will migrate their listings to one of the larger major exchanges. The slower a country is to fully adopt MiFID principles, the more the pressure will be for these “super-league” stocks to migrate.

The non-super league members will remain on the local exchange, which will become a second market – e.g. as AIM in the UK – for the equity for smaller, start up or less liquid firms, but still supplying listing and primary market functions. Whether or not these local markets will consolidate cross border will depend on the importance of providing these services locally – e.g. language, culture, specific economic conditions. The changes may be gradual, but you should avoid being caught at the wrong end of a polarising market.

NB A version of this blog appeared in my monthly Financial Sector bulletin. To receive a copy each month send an email containing the word SUBSCRIBE in the title to contact at mpi-europe.com.
TagsTrade executionWholesale banking

Comments: (1)

John Cant
John Cant - MPI Europe Ltd - London | 12 February, 2008, 13:16

An interesting additional opinion from the TowerGroup adding weight to our polarising assertion, although probably a smaller number of larger exchanges than we would currently predict. Could this be that they are discounting the new entrants - the Chi-X and Turquoise's - or is the assumption that global exchanges will follow the recent US model with these 'new kids' being swallowed up by the established players in a round of reconsolidation?

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job title Managing Director
location London
member since 2007
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I lead MPI Europe a niche financial sector consulting firm focussing on regulatory driven, risk, technology and operational change

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