Getting the global picture of trading volumes

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Getting the global picture of trading volumes
Panel introduction. Domingo García Coto Head of
the Research Department (BME) FESE Economics and
Statistics Committee (ESC) Member

• WFE Workshop on Market Structure and Statistics
• December 2, 2008
• Paris

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Turnover statistics

• The main point of discussion related to the
  securities markets statistics.
  
• An always evolving question in different
  competitive environments.
  
• Not only Europe but the world
• Need for a common statistics methodology
• Perfect comparability not likely to be reached in
  a near future
  
• Help the users of statistics
• FESE and WFE key role

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Background Turnover counting methodology FESE
Statistics Methodology Approach
1993 TSV / REV B. 2000 EOB / ND C. 2009
?
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Background Turnover counting methodology FESE
Statistics Methodology Approach
1993 TSV (Trading System View) / REV (Regulated
Enviroment View) Large differences in trading and
regulatory systems Volumes only comparable betwe
en exchanges adopted the same view
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Background Turnover counting methodology FESE
Statistics Methodology Approach
2000 EOB (Electronic Order Book) / ND
(Negotiated Deals) ISD, Euro, Internationalisatio
n, Alliances Changes in organisation and regulati
on Convergence towards order-driven electronic bo
oks, greater use of order routing systems
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Background Turnover counting methodology FESE
Statistics Methodology Approach
2009 ? New regulations and market structure
MIFID implementation in Europe New entities
MTFs, Trade Reporting Platforms
New rules Post trade transparency
FESE and WFE approaches need an update
Need for convergence of trading stats
methodology Members and non members of FESE and W
FE
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FESE Methodology Update the Functional Approach

• The logical key for the methodology update is the
  functional approach, looking at both price
  discovery and transparency of the trading
  mechanisms.

Automatic Matching Pre-Trade Transparency Post-T
rade Transparency
Automatic Matching No Pre-Trade Transparency Lim
ited Post-Trade Transp.
Matching Managed by Intermediaries
Reporting to authorized venues
ORDER BOOK
DARK POOL
OFF- ORDER BOOK
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FESE Statistics Methodology Definitions I

• Electronic Order Book Transactions (EOB)
• This contains all transfers of ownership by way
  of trades executed through the Exchanges/MTFs
  electronic order book, where orders placed by
  trading members are usually exposed to all market
  users and automatically matched according to
  precise rules set up by Exchanges/MTFs (generally
  based on price / time priority) and whose prices
  are displayed to the market. These trades may
  include floor trading organised by an
  Exchange/MTF. All electronic order book
  transactions are single-counted.

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FESE Statistics Methodology Definitions II

• Dark Pool Trading
• It includes all transfers of ownership by way of
  trades automatically executed in special markets
  / segments managed by Exchanges/MTFs where
  matching algorithms do not provide for pre-trade
  transparency and where both orders were not
  transparent. In case of platforms offering also
  smart order routing systems for the management of
  unexecuted orders, flows routed to other trading
  venues for their execution should not be
  included. In case of smart order routing, only
  the ultimate execution venue is allowed to
  integrate the corresponding trade in its own
  statistics. All dark pools trades are single
  counted.

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FESE Statistics Methodology Definitions III

• Off Electronic Order Book Trades (Off-EOB)
• These figures include all transfers of ownership
  by way of trades matched neither on an electronic
  order book nor on a dark pool. Bilateral
  negotiations leading to such trades may not be
  exposed to the market until after the trade is
  completed. In compliance with the
  Exchange/MTF/trade reporting venue trading rules,
  they can be executed in several ways adopted by
  intermediaries for their interaction. They are
  reported by an intermediary to the
  Exchange/MTF/trade reporting venue, that should
  avoid counting both sides of the trade. They
  include also late trades (reported after market
  close), OTC trades (matched at conditions
  different from those established by the Exchange)
  and those trades for which MiFID allows a delayed
  reporting. In order to be included in FESE
  statistics , this activity must generate revenues
  to the Exchange/MTF/trade reporting venue and/or
  be managed by a reporting system organised by the
  Exchange/MTF/trade reporting venue.

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FESE Statistics Methodology - characteristics

• Evolving methodology Since year 2000, it
  evolves over time.
  
• European standard in terms of number of venues
  using it European standard for the reporting of
  comparable trading statistics. 23 members of FESE
  who represent close to 42 securities exchanges
  from all the countries of the EU, Iceland,
  Norway, and Switzerland.
• European standard in terms of trading volumes
  Currently used to represent more than 90 of the
  cash equity trading volume around Europe.
  
• Worldwide Standard Close statistical cooperation
  between FESE and the World Federation of
  Exchanges (WFE), the Methodology has largely been
  adopted by WFE to represent the trading
  statistics of exchanges around the world in a
  harmonised manner.
• Common currency Straight-forward comparison in a
  common currency, the Euro.
  
• Historical use The FESE Statistics Database uses
  the Methodology as a base for the historical
  trading statistics since year 2000.
  
• Publicly available At the FESE website (all
  historical figures are available with a free
  access)

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