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European cash equity markets: The year of the MTF?

The European cash equity market’s status quo will be put to the test in 2008 when at least four new multilateral trading facilities open for business. Encouraged by the EU’s Markets in Financial Instruments Directive and the better than expected progress of MTF Chi-X, the newcomers promise to shake things up. Peter Koh reports.

Equiduct: evolutionary leapfrog

Euro Millennium: exporting US expertise

Turquoise: the banks slowly muscle in

MULTILATERAL TRADING FACILITIES have so far not enjoyed the same kind of success in Europe as their cousins the alternative trading systems (ATSs) have in the US. Estimates for the total market share of European equity trading held by MTFs range from 1% to 3%. Advances in smart order routing technology, a more favourable regulatory environment and familiarity with fragmented markets in the US, however, mean that the barriers to success have been substantially lowered and MTFs are expected to become much more influential in the near future. Consultancy Aite Group estimates that MTFs could capture as much as 20% of the market by 2011.

"It used to be that if alternative venues didn’t enjoy a big-bang start that people would rapidly lose interest and they would soon fall into obscurity and die," says Richard Balarkas, head of AES sales at Credit Suisse in London. "But traders no longer have to study two screens and agonize over what may or may not happen on a new venue.

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