Last month a group of seven investment banks got together to announce that they planned to launch a pan-European MTF to compete against Europe’s incumbent exchanges. Chi-X, a pan-European MTF run by Instinet, also launched, injecting a real dose of competition into the business.
While the clients of stock exchanges will be pleased to see competition erode the pricing power of exchanges and can look forward to lower exchange costs, the flipside to exchange competition is liquidity fragmentation.
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