PT - JOURNAL ARTICLE AU - Rober W.A. Kay TI - The Inevitability of Liquidity Fragmentation In European Equity Markets DP - 2007 Sep 21 TA - Trading PG - 45--53 VI - 2007 IP - 2 4099 - http://guides.pm-research.com/content/2007/2/45.short 4100 - http://guides.pm-research.com/content/2007/2/45.full AB - The markets for trading securities in Europe are undergoing significant change as a result of business, technology and regulatory pressures. Opportunities for technology, marketing and administrative cost savings are prompting stock exchanges to consolidate through merger and acquisition. However, the implementation of MiFID (Markets in Financial Instruments Directive) later in 2007 will explicitly encourage the creation and use of alternative trading venues in direct competition with the existing regulated exchanges. The outcome and interaction of these two trends is critically important for many constituencies. These obviously include the exchanges, brokers, dealers and independent entities that are directly involved in providing and using trading venues and the technology companies that support them. However others, including asset managers, pension funds and individuals as investors, corporations and governments who raise capital and politicians who have a public policy desire to increase market efficiency. One key area of concern and interest for all parties is the extent to which liquidity in the trading of European equities fragments away from the primary exchanges on which the shares are listed. Based on our review of academic literature, analysis of the existing position and off the record discussions with a range of more than one hundred interested parties our conclusion is that material fragmentation is both inevitable and desirable. Significant loss of market share will be experienced by existing stock exchanges. In some cases they may cease to exist as trading venues.