High frequency trading (HFT) platforms have low cost bases; are agile and dynamic. 1. HFT platforms have raised questions about the viability of big traditional exchanges in recent years because they have eaten away at their core profitability.
2. HFT creates unprecedented stiff competition in the trading of cash equities as well as other asset classes such as bonds and commodities including their derivatives.
3. Examining the drop: London stock exchange was trading 64% of UK equities at the end of 2010 compared with 75% in 2009.
4. Comparing it: Toronto stock exchange also had 64% of the Canadian market in 2010 compared to 95% in 2008.
5. Looking at the future: New York stock exchange (NYSE) and Nasdaq had 80% of trading volume around 2001, 10 years ago, while no exchange has more than 27% now. That means more than 70% of all share trading takes place outside the bounds of traditional exchanges in New York.
What does this mean? In the coming years, HFT platforms will account for even more of the market share, and traditional exchanges even less!
This exorbitant decline in market share of traditional stock exchanges hits profits and plays havoc with their cost bases and efficiency. It is the real backdrop to the LSE’s approach to buy TMX Group, owner of the Toronto stock exchange. Expect more mergers in the not too distant future.
We welcome your thoughts, observations and views.
All the best
Chairman and Founder: mi2g.net, ATCA, The Philanthropia, HQR, @G140
To connect directly with:
. DK Matai: http://twitter.com/DKMatai
. Open HQR: http://twitter.com/OpenHQR
. ATCA Open: http://twitter.com/ATCAOpen
. @G140: http://twitter.com/G140
. mi2g: http://twitter.com/intunit
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