Despite Concerns About High Frequency Trading, European Financial Industry Participants Have Not Changed How They Interact With Markets

NEw York - 16 May 2014

Survey Finds European Worries Echo Those in U.S. 

ConvergEx Group, a leading provider of global brokerage and trading-related services, has released the results of its European Equity Market Structure Survey, exploring the concerns and actions of financial industry participants regarding high frequency trading (HFT), regulatory oversight and market stability. The survey found that less than a third (28%) of respondents believe that European equity markets are currently fair for all participants, and almost twice as many believe that HFT is harmful (28%) as believe it is helpful (14%). Despite these concerns, more than two-thirds (67%) report that they have not made any changes to the way they interact with markets.

In April, a survey by ConvergEx Group of U.S. industry participants found similar results.

"Market structure issues continue to dominate the financial discussion in 2014, both in Europe and the United States," said Eric Noll, president and chief executive officer of ConvergEx Group. "Our European survey provides a snapshot of a financial community trying to understand and react to the impact of technology and regulation on markets. Worldwide, ConvergEx is helping its clients design and execute new strategies to address an evolving landscape."

"High frequency trading is part of MiFID II and the broader market structure conversation in Europe that includes the roles of multilateral trading facilities (MTFs) and broker crossing networks (BCNs)," said Joseph Cangemi, chief executive officer of ConvergEx Limited, a London broker-dealer and ConvergEx's European headquarters. "Our clients are looking to us to help navigate new regulations across the spectrum of European trading venues."

Not Finding Fairness
Respondents to the survey voiced significant concerns about the way European markets are currently structured and the role that HFT plays. Key findings:

  • European equity markets are fair for all participants – 28%
  • European equity markets are not fair for all participants – 43%
  • HFT is harmful or very harmful to market participants – 39%
  • HFT is helpful or very helpful to market participants – 19%

Wait and See
Despite concerns, the HFT debate has not led to significant changes by industry participants. Less than one-quarter (21%) reported making any changes at all. Key findings:

  • Have not made any changes – 67%
  • Have made slight changes – 19%
  • Have made significant changes – 2%

Rules of the Road
Financial industry participants are almost evenly split on their view of regulatory changes. Only about one-third (34%) of respondents believe current levels of regulation are appropriate for today's market structure. Key findings:

  • More regulation needed – 34%
  • Same amount of regulation – 34%
  • Less regulation – 32%

Standing Up for Stability
Respondents were divided on whether European equity markets could withstand the volume resulting from a geopolitical crisis or other large volatility shock. Key findings:

  • Confident markets could handle a large volatility shock – 40%
  • Very confident that markets could handle a large volatility shock – 5%
  • Not confident or not-at-all confident that markets could handle a large volatility shock – 32%

Methodology
The ConvergEx Group European Equity Market Structure Survey was performed by ConvergEx via an online survey of European financial industry participants, resulting in 131 respondents. The survey was conducted from May 6 – May 9, 2014, and has a margin of error of ± 10%. Respondents included buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants.

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