BATS Chi-X Europe Looks To Crack Spain

Terry Flanagan

BATS Chi-X Europe’s aggressive pricing strategy in Spain is beginning to pay off as the incumbent Bolsas y Mercados Españoles exchange continues to see its monopolistic grip weaken.

Spain has proven a hard nut to crack for multilateral trading venues, like BATS Chi-X and Turquoise, due to the failure of Spanish regulators to fully embrace the European Union’s Markets in Financial Instruments Directive.

But last month BATS Chi-X Europe increased its share of the Spanish equities market to 5%, a year-on-year increase of 3.4% and also a 1.6% jump on January’s figures.

The incumbent BME exchange, as of February this year, had a market share of 94%, a year-on-year fall of 4%, with Turquoise claiming 0.5%. Dark pools and broker-trader platforms make up the remaining 0.5%.

BATS Chi-X Europe offers both a visible and dark book, but says most of its volumes in Spain come through its visible platform.

Since the introduction of Mifid in 2007, share trading has been allowed to take place away from national stock exchanges, resulting in the rapid rise of these multilateral trading facilities due to their reduced fees.

BATS Chi-X Europe is now the region’s largest trading platform and leading incumbent exchanges such as the London Stock Exchange, NYSE Euronext and Deutsche Börse have seen big falls in their market share.

However, in Spain, inefficient post-trade processes have created barriers to entry for multilateral trading facilities to flourish. It is the only major European Union market where alternative trading exchanges have yet to gain a real foothold.

Late last year, BATS Chi-X Europe embarked upon a pricing promotion on six of the largest and most liquid stocks in the IBEX 35, Spain’s benchmark stock index. It also offered discounts on clearing and settlement fees for large orders of shares in the six stocks.

And in January, BATS Chi-X Europe extended the rebate to all IBEX 35 stocks, although this did not extend to discounts to post-trade costs. The scheme is set to last until the end of this month.

A spokesman for BME said that there were no barriers to entry in the Spanish market, despite what alternative trading venues might say, and that its bid-offer spreads were lower than its rivals.

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