Where Has All the Trading Gone? A Network Approach to European Stock Exchanges and Alternative Trading Venue

This paper investigates the network features of European trading venues by analyzing the behavior of simultaneously quoted stock. Equity trading venues include both regulated Stock Exchanges (SEs) and Alternative Trading Venues (ATVs) and these represent the nodes of our network. The connections among these nodes are determined by choices of investors to exploit various venues in which a stock may be traded. Using trading volume data of nearly 22,000 equities we use social network analysis to measure prestige and connectivity between the various trading venues between 2005 and 2009. We find that the evolution of ATVs (including multi-lateral trading venues BATS, Chi-X and Turquoise, as well as various Systematic Internalisers) eroded the relative prestige of the largest established European SEs (particularly London). Prestige concentration also declined after MIFID although smaller SEs did not appear to suffer any major losses (in prestige). The introduction of multi-trading venues does not appear to have adversely influenced connectivity in terms of reducing the number (or volume) of cross-listed relationships although the introduction of ATVs has had a big impact in increasing connectivity overall and decreasing trades concentration