Analysis : Equity markets in Europe : Winter 2019/20

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 based on three quarters of 2019 as a guide on the current trend.

To give an overall indication of the market in 2019, 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 to the last two quarters and remained at a consistent level. The Value Traded decreased from mid year, but then increased into the Autumn with some volatile peaks during the last two quarters.

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 its based upon the major index constituents of each market, and includes both price ties and unique best price.

The Lit markets in Q4 continued the trend from Q3, with the strength of the Primary Venues a factor as there were more decreases in % time best price across all MFTs across most markets with the exception of MIB where Bats and Aquis increased % time and Turquoise on CAC.

The Market liquidity picture was mixed in Q4, with FTSE and CAC losing liquidity on most Venues, but DAX and MIB gaining on all venues apart from Turquoise. OMX-s lost liquidity on the Primary, but gained on ChiX and Bats. The most significant decrease was on the CAC Primary with a reduction of €58m on the Primary.

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 OMX-s with MIB the only market where it is not in first rank.

For the Periodic Auction Pools, the rankings stayed consistent with the previous quarter, but overall, the average trade sizes increased in all Venues, but to a lesser extent than the Dark Pools.

As has been previously noted in Q4 we observed an increase in Trade sizes across the Non-Lit Regulated markets, but what is the trend on Value traded if we add SI flow as a comparison.

The chart below shows the trend in daily value traded in Dark Pools, Periodic Auction Venues and SI for major index constituents across Europe in 2019.

We can see from the chart above that the trend in Dark value traded increased slightly in Q3, but had a slight reduction in Q4 together with a corresponding decline in Periodic Auction Value traded. The interesting trend is the relative dramatic increase in SI Volume mid way through Q3 and into Q4. Not all of the SI value traded is fully addressable, but even taking this into account the increase in value traded is significant. The other observation (not shown on the charts) is that we observed an increase in the number of Blocks Traded SI in Q4, and this may account for a proportion of large increases in value Traded in Q4.

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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