Alternative Venues:Going from Strength to Strength

 
Mark Hemsley from BATS Chi-X Europe talks about the progress being made by alternative venues compared to incumbent exchanges.
FIXGlobal: What factors have allowed alternative venues to succeed in an illiquid environment?
Mark Hemsley, Bats Chi-X Europe:
Fees, technology and customer service are all important factors in attracting business, but above all, liquidity begets liquidity. We have built a healthy market comprised of diverse participants and diverse types of liquidity, which together offer customers the best chance for order executions. In addition, alternative venues provide services not offered by the incumbent exchanges – such as interoperable clearing and pan-European smart order routing. By consistently performing well in all these areas, alternative venues can increase their market share and increase liquidity.
FG: What advantages do alternative venues in Europe enjoy that the incumbent exchanges do not?
MH: While we operate under an equivalent regulatory regime to the incumbent exchanges, our pan- European business model gives us a critical advantage of broad opportunities in Europe and it is also a model that none of the exchanges have been able to adopt fully yet. Alternative venues also operate with very low-cost bases compared to the incumbent exchanges. This puts them in a good position even during periods of low trading volumes, as well as allowing them to be aggressive over pricing and responsive to customers in a way that the exchanges are not able to do – given their higher cost bases.
FG: What will it take for alternative venues to experience further growth in Europe?
MH: We see there being further opportunities for growth in markets that are in the process of adopting MiFID – for example, Spain, where we have recently begun to make inroads.
Alternative venues also have the opportunity of expanding into areas where exchanges still hold a monopoly. Market data is one area where exchange fees have increased despite their share of the market decreasing, in some cases by as much as 40-50%. We do not believe that current exchange market data fees are set at an appropriate level and we disagree with the exchanges’ policies, which often do not allow for customer choice. Therefore, we recently announced a competitive pan-European market data pricing model, with which we aim to set a competitive reference price to that charged by the incumbents.