This report focuses on the performance of Euronext Milan, nearly two years after the migration to the Optiq® trading platform.
The strength of ‘Made in Italy’ equity trading
Euronext Milan continues to solidify its position as a leader in European equity trading, driven by robust market performance, growing trading volumes, and significant improvements in market quality. In 2023, the FTSE MIB index delivered exceptional gains, outperforming major global benchmarks, fueled by a strong banking sector.
Following the Optiq® migration, Euronext Milan demonstrated enhanced liquidity, tighter spreads, and increased presence at the European Best Bid and Offer (EBBO), reaffirming its dominance as the preferred venue for trading Italian securities.
Executive Summary
- Performance: Milan outperformed other markets, with the FTSE MIB index climbing 28% back in 2023, outpacing the US (S&P 500 up 25%) and broader European markets (Eurostoxx 50 up 19%), largely driven by gains in the banking sector as a result of increased interest rates.
- Trading Value Growth: Euronext Milan's daily trading value exhibited steady growth, particularly notable after the Optiq® migration in March 2023, with Milan's contribution to Euronext volumes peaking at 31% in H1 2024. The Italian market maintains a robust domestic ecosystem, with local brokers accounting for over 30% of volumes. Euronext Milan remains the preferred venue for trading on Italian securities, stably increasing its market share, consistently above 71%.
- Market Quality Improvement on FTSE MIB: Following Optiq® migration, market quality metrics for Euronext Milan registered a long-term improvement.
- The average spread decreased by 1.3 bps, from 5.8 bps to 4.5 bps;
- Liquidity around BBO increased by an average of +€8.2K, from €45.4K to €53.6K;
- The percentage of EBBO setting events by Euronext Milan increased from 49.7% to 66.1% post-migration, making the venue +24.8% more present at unique times at EBBO.
- Market Quality on FTSE MID:
- On less liquid stocks, such as the components on FTSE MID, Euronext Milan outperforms other MTFs in market quality leading in key metrics such as EBBO setting percentage (73.7%) and unique time presence at EBBO (82.0%).
- In terms of liquidity, Euronext Milan also offers the highest notional liquidity around BBO at €10.6K.
Methodology
- Market quality metrics are analysed for the main Indexes representing Euronext stocks. Trading venues considered are Euronext, Cboe Europe (Cboe), Aquis Europe (Aquis) and Turquoise Europe (Turquoise).
- The market quality data in this study is sourced by the independent provider BMLL Technologies. The Welch t-test is conducted to assess statistically significant changes in metrics, with the first period spanning 2022 through March 2023 (prior to the Optiq® migration) and the second period covering from 27 March 2023 (post-migration) through the end of September 2024:
- Average Spread: the mean bid-ask spread of the day, given in basis points relative to the mean mid-point price.
- European Best Bid & Offer (EBBO) Setting: the number of events where a venue improved the consolidated best ask and bid price, as a percentage of the number of all consolidated ask and bid price improvement events for the instrument.
- Liquidity around BBO Notional (€K): the time-weighted average amount of notional around the BBO.
- Liquidity around BBO Number of Shares (K): the time-weighted average amount of shares around the BBO.
- Unique Time Presence at European Best Bid & Offer (EBBO) in percentage: The percentage of time during continuous trading when a venue is the sole one at the consolidated best bid and ask price.
Download Equity Market Quality Analysis - The strength of ‘Made in Italy’ Equity Trading
November 2024