The European Exchange Landscape

June 12, 2006


Paris, France June 12, 2006

At a time when European exchanges are undergoing tumultuous changes, a report from Celent examines the landscape and predicts how exchanges will evolve in the coming years.

Exchanges in Europe have benefited from a significant uptick in trading activity in the first quarter of this year, with trading volumes up 45% compared to the same period one year prior. Profit margins are robust, with the average European exchange achieving profit margins of 25%.

However, despite such rosy financial performance, lurking just over the horizon, a new directive from the European Union, the Markets in Financial Instruments Directive (MiFID), promises to usher in fundamental changes in European capital markets, potentially disenfranchising exchanges from a privileged role at the centre of European equities trading.

Myriad moving parts pose a multifaceted challenge to ascertaining specifically how the capital markets landscape will evolve. Currently, the capital markets are still fragmented within the European Union, but consolidation is accelerating and likely to continue in the near future. This study examines the main European exchanges and the consolidation processes that are reshaping European capital markets. Business trends and technology drivers that are changing the demand for exchange services are also analysed and discussed in turn. The potential impact of regulatory changes on exchanges is discussed, and a view on how market data provision is evolving is presented. Finally, the structure of the European clearance and settlement framework is discussed.

According to Octavio Marenzi, CEO of Celent and co-author of the study, "While MiFID creates new opportunities for alternative trading systems in Europe, directly challenging the incumbent exchanges is likely to be an exercise in futility. Rather these new entrants will have to occupy specialised niches, such as block trading, crossing, or price improvement services."

A table of contents is available online. The 34-page report contains 22 charts.


Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
Tel: +1 212 345 1366

Europe (London)
Chris Williams
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
Tel.: +81 3 3500 3023

Table of Contents

Paris, France June 12, 2006

Executive Summary 3
Introduction 4
Market Overview 5
  Background 5
  A Fragmented Market 7
  Publicly Traded Exchanges 10
Revenues And Profits 12
  Consolidated Revenues and Profits 12
  Revenue Breakdown 12
Exchange Trading Services 14
  Equities Trading 14
  Derivatives Trading 16
  Fixed Income Trading 20
Other Exchange Services 21
  Listing Services 21
  Clearing and Settlement 22
  Market Data 24
Increased Demand For Exchange Services 26
  Algorithmic Trading 26
  Declining Profit Margins in Market Making 28
  Technology Innovation and Costs 28
MiFID And Its Impact 29
Looking Forward 32


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