Cheaper flights?

Ana Herrero-WallaceAt times I’ve got the impression that many of the European MTFs seem to compare themselves to cheap, no-frills airlines. The emergence of MTFs post-MiFID brought lower explicit costs, with incumbent providers like the LSE forced to lower their own rates to compete. In much the same way, the arrival of Ryanair and easyJet on the scene must have put pressure on British Airways to lower their own ticket prices. But in reality who is really benefiting from lower trading fees?

I just read an article published in The Trade News asking buy-sides whether they have seen any reduction in trading costs following the implementation of MiFID. The results of the IMA poll are alarming, showing that close to 60% of buy-sides have not seen a reduction in trading costs. So if it’s not the buy-sides (passengers in the airline analogy), then who is seeing the benefits? Could it be the brokers benefiting from flying with alternative airlines? Some claim that the required investment from brokers (in SOR and connectivity) to access new liquidity has outweighed the benefits of the increased competition.

Personally, I think it is hard to gauge the impact of MiFID on transaction costs. Let’s not forget that the implementation of the new legislation coincided with one of the most volatile trading environments ever – after 2007 markets behaved in an unprecedented way.

So, in reality, has 'flying cheaply' really affected the bottom line for market participants?

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Comments
One Response to “Cheaper flights?”
  1. Laurie Wallace says:

    Very interesting, like the comparison

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