Anybody interested in being a trading venue ?

The FSA has a new list for Approved Reporting Mechanism (and why would you get there unless you were - or plan to become - a trading venue ?), there is a new interesting entrant: Credit Suisse.

Five months before November 1st, Project Turquoise is still a project, Chi-x of Instinet is being tested and some other things are appearing in other markets.

Credit Suisse being on the FSA ARMs list is the first example of a big bank 'declaring its hands', will they be SI or will they start their own MTFs. There is no rush to internalise and I suspect a lot of Market Makers still think they can go on market making as they do now post Nov.1st - at least in London. This could be another example of the 'to-morrow' effect on MiFID.

But why internalise ? or creating an MTF ? Well, two things come to mind. One is the intention to create a market in a specific financial instrument, create your own business hours and trading rules (market makers will have to operate through a regulated market and only during the market business hours. So, technically speaking, large transactions out of trading hours are out). The other is to stimulate a market in instruments not listed in the 'local' market (for instance Euronext shares in London or German Shares in Milan).

But also, what about instruments not currently traded in a regulated market in a specific jurisdiction ? (After all most commodities are traded in a couple of places around the world for historic or business reasons); and what about some of the instruments included in MiFID that were not included in the ISD ? Spread betting sites trade contracts for differences, but what is a spread betting site ? A broker, a market, or what ? (See the forthcoming MiFID expands the concept of investment business. Part 2)

So far most analysts have discussed the issues of competing with the local market (what Project Turquoise will do once it happens) but I think that the most likely scenario will be local access to instruments listed in foreign markets. Hard to say what will happen to non EU instruments but within the EU that may really increase the weight of London as a 'trading market' compared to the rest of Europe.

Of course, there is a lot of time to sort this, after all, it is just May and November 1st is about five and a half months away (please put a hint of sarcasm in here when you read this); this is probably the reason why only Credit Suisse so far has declared its hand. All the other market makers out there have a lot of time to think !