GETCO: the white knight for competition if BATS disappears?

Paris and London - 22 November 2011

Crédit Agricole Cheuvreux publishes its October Market Indicators, produced in conjunction with TAG

• At its hearing with the UK Competition Commission Getco stated that, in the event of a loss of competition due to the BATS-Chi-X merger, it would support and invest in any new MTF entrants.
• Chi-X shows strong long-term positive trends, and dominates other MTFs in terms of the price formation process.
• Chi-X' liquidity features are more closely resembling those of regulated markets.
• Simultaneously, BATS is losing ground to Chi-X on European LMIs.
• So much so that keeping two separate lit order books for BATS and Chi-X may no longer be easily achievable.
• If Chi-X will benefit from BATS' technology upgrade after the merger
• After the merger, BATS will have the opportunity to provide listings to European firms, as it did in the US, and thus become the first true pan-European regulated market.
• BATS was given provisional approval from the UK Competition Commission for its acquisition of Chi-X in October. Final go-ahead is expected on 2 December.

Breaking news

• On 9 November, the French Senate adopted an amendment aimed at limiting High Frequency Traders.
• It seeks to tax all orders from traders with an excessive cancellation ratio.

Other mergers

• Deutsche Börse and NYSE Euronext have been asked several questions by the European Commission with regard to the probable loss of competition in clearing for their derivatives platform.
• The London Stock Exchange continues its expansion with the acquisition of the FSA's Transaction Reporting Service.

October figures

• Daily volume on European Local Main Indices (LMIs) returned to normal, with a smaller number of trades, while trade sizes were stable for the first time in three months.
• 27 October showed particularly high volumes and volatility due to macro-economic reasons, as did 1 November.
• BATS returned to its down-hill performance and fell under the 6% threshold on European LMIs.
• Chi-X and Turquoise had mixed performances but improved overall.
• Primary markets remained relatively stable.
• One phenomenon emerges: the standardization of Average Trade Sizes across countries for each venue.
• Dark market shares increased drastically, contrary to liquidity during auctions. Bid-ask spreads were tighter. This is consistent with lower volatility.

Fact of the month

• Chi-X Australia was launched on 31 October.
• It received ASIC approval for trading on more equity securities and ETFs.
• This is Australia's first major step into a multi-market environment.

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