Equity trading systems in Europe despite being electronically operated, permit the dealers to intervene. These exchanges differ in some aspects and resemble in some, which is reflected in the article mentioned below. It has been observed lately that the environment of financial markets in European Union have undergone changes.
These changes comprise an alteration in the operating environment since the inception of Investment Services Directive or ISD. Another change, which has taken place is that institutional trading has developed manifold in Europe. Owing to the changes mentioned above, changes in the equity trading system in Europe have occurred.
The following four equity-trading systems in Europe were introduced since the year 1994.
SWX by Swiss Exchange (1995)
SETS by London Stock Exchange (1997)
TSA by Amsterdam Stock Exchange (1994)
XETRA by Deutsche Borse AG in the year 1997.
In addition to the above, there was up gradation of Paris Bourse trading system during the course of which the trading rules were also reviewed.
Similarities between the equity trading systems in Europe(mentioned above):
Studies indicate that the equity trading systems mentioned above have the following common features.
Depending on the type of order (small orders, large orders or medium orders) or type of security (which may include capitalization, liquidity) the trading norms in the above equity trading systems may change. Another similarity is that all the above equity trading systems is “electronic order matching systems”.
Dissimilarities between the equity trading systems in Europe(mentioned above):
The above trading systems in Europe differ with regard to the “degree of consolidation” pertaining to order flow.
A significant proportion of trade in case of Swiss Exchange and Paris Bourse occur inside their trading systems SWX or NSC. As compared to this, order flows are fragmented in Germany as well as in LSE or London Stock Exchange for stocks trading in XETRA and SETS respectively.
Differences also lie in the degree of transparency exercised by the equity trading systems in Europe.
There are also differences pertaining to privileges as well as obligations of the operating dealers within the trading systems. In addition to these settlement as well as clearing methods of these trading systems also vary.
It may be thus concluded that although these equity trading systems are order-driven markets, which operate electronically, nevertheless, they also allow the dealers to intervene.