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Capital Markets

Trading: MTFs on an uncomfortable ride

Multilateral trading facilities have been gaining market share in recent months but the market itself has been shrinking. MTFs’ conspicuous success is also attracting some unwanted attention.

The new trading platforms that compete against established exchanges to match orders are having a clear and profound impact on the European trading landscape. Chi-X, the first of a growing number of pan-European MTF to have launched since the EU’s Markets in Financial Instruments Directive (Mifid) came into effect, now regularly handles more than 15% of the total volume of FTSE 100 shares traded, while Turquoise, a rival MTF initiated by a group of investment banks that launched in August, has already captured almost 5% of that market.

The investment banks that have been the driving force behind these platforms are thrilled. Analysts estimate that the amount that banks have invested in such platforms is already dwarfed by the amount they have saved through lower exchange fees. Citi recently said that it now does more than half its trades on Chi-X and Turquoise.

"Equity trading in Europe is an evolving landscape and it is clear that the wholesale changes we are seeing will be an uncomfortable ride for many," says Miranda Mizen, an analyst at consultancy Tabb Group. "Exchanges are under pressure and this will get more intense and force them to become more like their new competitors who have significantly lower cost bases.

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