Peter Randall of Chi-X did a good (well, both aggressive and funny in parts…) presentation at the Intel Faster Trading Event – he put forward the LSE as an "Old-School" institution, saying that in taking trading electronic (years back) the LSE simply computerised the existing human interaction, using software to implement a good(ish) matching engine.
He then said that today’s focus should be on the I/O queue (trade transaction throughput) since he suggested that many brokers have been asked by the exchange "would you mind slowing down your trading, old boy" as trading algorithm throughput becomes limited by the capacity of the exchange. He mentioned the LSE has a capability of 9,000 transactions per second whereas Chi-X has around 30,000 tps.
Peter said that the Exchanges (and Regulators) didn’t like the "f-word" (steady!…) of "fragmentation" (i.e. moving away from a national exchange (concentration) model). He them got a little more fruity talking of how the exchanges also hate the "c-word" (where is this going?…) with "competition". He then justifed Chi-X’s current standing by listing off for example that Chi-X did 9.69% of the trading volume in the FTSE yesterday and said that Chi-X typically offering 2.05 basis points cost improvement over trading on LSE. Key points in their success where the ready use of FIX as an industry standard, plus their approach of giving market data away for free (already appearing on Bloomberg terminals for instance).
Taking some lessons from the US, he said that two key points in ensuring the future success of Chi-X (and other MTFs) were to "equitise flow" (i.e. get the major institutions who use Chi-X to also become equity investors) plus he said that a venue needed to offer very low cost to institutions that make and take trades in the same security during the day. Good presentation overall, certainly very clear who Chi-X is attacking…