I spent yesterday at a T2S Information Session. (If you don’t know, T2S is the new pan-European settlement platform being developed by the European Central Bank. Declaration of interest: I am an Advisor to the ECB on this project.)
There was a fascinating panel discussion on trading volumes in the US and Europe. This matters to T2S, as the financial projections for T2S depend on assumptions about settlement volumes going out ten years. One of the panellists pointed to the huge gap between trading volumes in the US and Europe. The US typically sees 100 million trades per day, across its 50 exchanges and other trading platforms. This compares with some 10 million trades per day across all the European exchanges and MTFs (also about 50, if you include Bratislava and Malta). The driver behind the high volumes in the US is algorithmic trading. In fact, we heard that one large algo firm alone can do over 10 million trades per day – that’s right: more than the entire European trading volume executed by a single firm.
Is Europe going to catch up with the US? Is it just a matter of getting the right infrastructure in place (super-fast trading systems, interconnected CCPs, a common settlement platform)? Or are there other structural or cultural factors that mean the US is not a model for Europe? At T2S, we’d love to know.