Analysis : Equity markets in Europe : Spring 2020

LiquidMetrix analyses consolidated performance figures for equities and ETFs traded in Europe in the previous quarter.

LiquidMetrix’s unique benchmarking methodology provides accurate measurements of trends in market movements. We have seen many changes to market microstructure over the last year, and here we present statistics from January 2019 to March 2020 as a guide on the current trend.

To give an overall indication of the market from the beginning of 2019 to the end of Q1 2020, we are comparing the value traded in Europe against the % traded LIS. The trend over the year was a steady increase in the % LIS against the general increase in value traded to its peak in June, although slightly declined in the last two quarters of 2019 and remained at a consistent level. In Q1 2020 we see the dramatic increases in volumes, but the % LIS declines in early March, then increases significantly.

One criteria to assess venue quality is the % of times the venue has a best price in the market. This is a measure of how competitive the lit markets are as it is based upon the major index constituents of each market, and includes both price ties and unique best price. There was very much a change in direction for lit markets in Q1 as the trend was largely reversed from Q4 2019.The primary venues all had decreases in % time best price across all markets. There was a dramatic decrease on CHIX across all markets, the reduction being mostly more than twice any other venue decrease. Turquoise gained a little on FTSE possibly indicating more resilient price making participants.

The market liquidity picture shown below reflects only the first two months up to the beginning of March and does not display the effects of the pandemic on the dramatic reductions in liquidity later in the month. Liquidity over the first two months of 2020 was in fact increasing on most markets.

The tables above provide a method to asses performance of dark pools in Europe with the value traded, average trade value and measure the % of times there is a corresponding movement on the lit market. Overall, there was an increase in trade sizes across all dark markets in the period and Turquoise increasing its ranking on MIB now ranking first on all markets. Liquidnet also moved up the rankings on MIB.

For the periodic auction pools, Turquoise gained a place on FTSE, and Sigma Y rose to rank second on DAX as it is on all other markets.

As has been previously noted in 2019 we had seen an increase in trade sizes across the non-lit regulated markets, but we see some dramatic changes in volumes traded in SI.

The chart above shows the trend in daily value traded in dark pools, periodic auction venues and SI for major index constituents across Europe from Q4 2019 to Q1 2020.

We can see from the chart that the trend in dark value traded increased towards the end of Q4, but had the reductions expected towards the end of year. In Q1 dark volumes increased again, but periodic auction volumes remained
flat, but conversely there was a dramatic increase in SI volumes back up to the rates seen prior to year-end. The SI volume has remained reasonably consistent throughout Q1 with a few spikes at the large volatility days.

ISS LiquidMetrix are pioneers in the measurement of European Fragmented markets, and provide research,TCA best execution and Surveillance for financial market participants and regulators – www.liquidmetrix.com

©BestExecution 2020

 

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