It is a well held truism in the banking and broking market that retail banking and exchange trading is generally very sticky. People tend not to move their current/savings account from the bank that they joined at university and will live with it for their lives. Despite it, many times, being a bad financial choice.
Similarly, exchanges are also pretty much sticky, moving trading away from an exchange to another exchange is very difficult and while it has happened before (Bund Futures taken away from LIFFE to Eurex), the history of exchanges is littered with failed attempts by exchanges to capture business from other exchanges. Eurex USA, Virt-X, Nasdaq Europe and a whole host of other examples lay testament to that fact.
But we now have this tiny exchange, called as Chi-X, run by Instinet. It has been very sneaky, and has managed to attract trading away from the big boys. For example, it has managed to have 44% and 29 %market share on Philips and ING in the end of August. It has also grabbed 10% of many very highly liquid German stocks, etc.
With MiFID barrelling down Europe's throat, Chi-X is positioned brilliantly. It promised a 10 times cheaper service and a 10 times faster trading opportunity compared to the big guys like LSE and NYSE Euronext. At end of the day, what market participants want is the best price formation process in the public eye at the lowest cost and at the fastest possible speed. In other words, you don't want the traffic policeman to become the bottleneck. So if he does become the bottleneck, the traffic is going to move away from your road to the road where the traffic policeman is the most efficient.
Life as the exchanges know it is going to (ex)change!
All this to be taken with a grain of piquant salt!!!
Similarly, exchanges are also pretty much sticky, moving trading away from an exchange to another exchange is very difficult and while it has happened before (Bund Futures taken away from LIFFE to Eurex), the history of exchanges is littered with failed attempts by exchanges to capture business from other exchanges. Eurex USA, Virt-X, Nasdaq Europe and a whole host of other examples lay testament to that fact.
But we now have this tiny exchange, called as Chi-X, run by Instinet. It has been very sneaky, and has managed to attract trading away from the big boys. For example, it has managed to have 44% and 29 %market share on Philips and ING in the end of August. It has also grabbed 10% of many very highly liquid German stocks, etc.
With MiFID barrelling down Europe's throat, Chi-X is positioned brilliantly. It promised a 10 times cheaper service and a 10 times faster trading opportunity compared to the big guys like LSE and NYSE Euronext. At end of the day, what market participants want is the best price formation process in the public eye at the lowest cost and at the fastest possible speed. In other words, you don't want the traffic policeman to become the bottleneck. So if he does become the bottleneck, the traffic is going to move away from your road to the road where the traffic policeman is the most efficient.
Life as the exchanges know it is going to (ex)change!
All this to be taken with a grain of piquant salt!!!
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