Stock Exchange Market Share Is Not the Whole Issue


The LSE, like many other European exchanges, finds itself under severe pressure to maintain its market share. However, investors concentrating purely on market share are not viewing the whole picture…


The media has proclaimed various degrees of shock each time competing (MTF) platforms have taken market share from the exchanges. Yet, the reality is the exchanges were in many cases simply ignoring the evidence of what had happened in the USA under similar regulatory regimes.

Now it looks as if the psychologically important 50% barrier for London market share could be breached. Not unsurprisingly some people are concerned about the positioning of Europe’s traditional equity market leader.

It was always likely that at lest a third of London’s volume could go to competitors. However,  the current state of market share is  interesting as many trades have ‘come in’ from the OTC marketplace to be reported. Meanwhile, the competing platforms can arguably be said to be growing the business per se. True, equity turnover may be a tad sluggish compared to previous highs in many parts but the sum total of equity volume given the relatively depressed nature of UK share values, does suggest the market is doing a lot better thanks to competition compared to previous downturns.

However, the really difficult issue for LSE going forward is in its data sales. This provides significant group revenues. However, how many investors want  to pay ‘full price’ if they are receiving only a portion of the ‘full tape’ that they previously anticipated? If the LSE continues to haemorrhage market share, there will come a point (60%, 55%, 50%?) where investors will become reluctant to pay the ‘full price’ for a lesser product. Some traders might just accept the free data offerings from LSE competitors instead.

That is likely to have a significant impact on LSE valuation.


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