Talk:Multilateral trading facility

Impact on European trading

New entrant MTFs have had a considerable impact on European share-trading. MiFID enabled trading venues to compete with one another. The legacy exchanges largely chose to keep to their existing business models and scope, but new entrant MTFs have made a significant impact.

Chi-X Europe, the largest MTF by volume, is also the largest trading venue in Europe according to some statistics [CHI-X is no longer an MTF] . Aquis Exchange, launched in 2012, reached 3.67% of the market share in November 2018 .

MTFs have been launched in other asset classes as well, one of the examples is LMAX Exchange an FCA regulated MTF for trading spot FX and precious metals.

This is part of a process known as fragmentation, where liquidity for one security is no-longer concentrated on one exchange but across multiple venues. This in turn forced traders to make use of more sophisticated trading strategies such as smart order routing.

Impact on fees

The new MTFs were notable for:

• High trading speeds, using technology to make their platforms attractive to high frequency traders;
• Low cost bases, running their organisations with minimal headcount;
• Subscription model, where users pay a rate according to the level of activity
• Maker/taker pricing, paying members to trade on the platform as long as the trading adds liquidity rather than takes it;
• Trading incentives, often called jump-balls, in which stakes are given to trading members in return for volume traded.

These all made the new venues highly attractive and to take market share. In turn, existing venues were forced to discount heavily, significantly impacting revenues.

Limited individual success

Although they have forced significant adjustments within the equity trading markets, the MTFs themselves have had limited success. Chi-X Europe claims to be profitable, [Chi-X has since been acquired by BATS, which was acquired itself by CBOE. This makes this sentence outdated] . However Nasdaq OMX Europe was shut down in 2010 and Turquoise was bought by the LSE.

Many consider the MTF business model unsustainable, although Alisdair Haynes, the Chi-X Europe CEO, said "We are not going to raise prices, though most people expect we have to". [Alasdair has since left the company to set up Aquis Exchange, therefore the the premise of the whole sentence is no longer valid.]

FinsburyMV (talk) 10:27, 11 December 2018 (UTC)