CREDIT AGRICOLE : GETCO: the white knight for competition if BATS disappears?

Paris, the 23 november 2011

Crédit Agricole Cheuvreux publishes its October Market Indicators, produced in conjunction with TAG.
- At its hearing with the UK Competition Commission Getco stated that, in the event of a loss of competition due to the BATS-Chi-X merger, it would support and invest in any new MTF entrants.
- Chi-X shows strong long-term positive trends, and dominates other MTFs in terms of the price formation process.
- Chi-X' liquidity features are more closely resembling those of regulated markets.
- Simultaneously, BATS is losing ground to Chi-X on European LMIs.
- So much so that keeping two separate lit order books for BATS and Chi-X may no longer be easily achievable.
- If Chi-X will benefit from BATS' technology upgrade after the merger
- After the merger, BATS will have the opportunity to provide listings to European firms, as it did in the US, and thus become the first true pan-European regulated market.
- If these changes were to generate a lack of competition in GETCO's mind, the High Frequency market maker would set things right.
- BATS was given provisional approval from the UK Competition Commission for its acquisition of Chi-X in October. Final go-ahead is expected on 2 December.
Breaking news
- On 9 November, the French Senate adopted an amendment aimed at limiting High Frequency Traders.
- It seeks to tax all orders from traders with an excessive cancellation ratio.
Other mergers
- Deutsche Börse and NYSE Euronext have been asked several questions by the European Commission with regard to the probable loss of competition in clearing for their derivatives platform.
- The London Stock Exchange continues its expansion with the acquisition of the FSA's Transaction Reporting Service.
October figures
- Daily volume on European Local Main Indices (LMIs) returned to normal, with a smaller number of trades, while trade sizes were stable for the first time in three months.
- 27 October showed particularly high volumes and volatility due to macro-economic reasons, as did 1 November.
- BATS returned to its down-hill performance and fell under the 6% threshold on European LMIs.
- Chi-X and Turquoise had mixed performances but improved overall.
- Primary markets remained relatively stable.
- One phenomenon emerges: the standardization of Average Trade Sizes across countries for each venue.
- Dark market shares increased drastically, contrary to liquidity during auctions. Bid-ask spreads were tighter. This is consistent with lower volatility.
Fact of the month

- Chi-X Australia was launched on 31 October.
- It received ASIC approval for trading on more equity securities and ETFs.
- This is Australia's first major step into a multi-market environment.