What is happening on the market?
Olof: The financial markets in the Nordic countries are changing due to increased competition between exchanges and new trading platforms such as Burgundy. The fragmentation on the market is a fact and Nordic equities are now traded outside the stock exchanges. We have seen that the fragmentation has been quite dramatic, with approximately 28 percent* of trading in Nordic equities are now taking place outside of the listing exchanges.
What becomes important then?
Olof: It is significant that market data vendors supply information from all relevant marketplaces where e.g. Burgundy is one of the new ones. This is important so that the listed companies, the media etc keep in mind that they should present numbers from all marketplaces. This can be done by requesting that your information vendor include Burgundy and other MTFs in their statistics. This is important to consider when providing share information in annual reports, quarterly reports or on websites and elsewhere.
What else can happen?
Olof: That one comes to the wrong conclusions, such that trading in a company’s share is significantly reduced, while in fact the liquidity just has moved. The turnover in a stock is an important factor when evaluating an investment. Another thing is that if you do not have the full picture from all marketplaces you risk not obtaining the best price.
When some 28 percent of trading in Nordic equities is taking place on marketplaces other than the listing exchanges, companies with a fragmented share could miss a substantial part of their trading volume.
Am I as investor affected by this?
Olof: The stock market lists that are shown in the papers today may not show correct volume, high and low price. This can lead to wrong conclusions as demonstrated in an article during the fall where one share was described as having lost significant volume, but in fact the trading had moved away from the primary exchange to other marketplaces, including Burgundy. If you are a fan of technical analysis you should be aware that you are not looking at all trading in a particular stock. We at Burgundy are regularly meeting with the editors of media to make them aware of these important issues.