Press releases 2005
18 October 2005
SETSmm – significantly reducing the cost of trading in Small Cap securities.
The London Stock Exchange today published the findings of an independent review, showing a significant reduction in the cost of trading the 200 largest Main Market Small Cap Index securities, following their transfer to SETSmm, the Exchange’s successful hybrid electronic order book.
The independent review of the first three months of trading provides clear evidence that SETSmm has driven down trading costs in Small Cap securities, resulting in considerable benefits to the market as a whole.
Martin Graham, Director of Market Services and Head of AIM at the London Stock Exchange, said:
“This review provides further evidence of the success of SETSmm in improving market efficiency. SETSmm has reduced spreads in Small Cap securities by 33 per cent by combining order books with the established quote driven way of trading giving investors greater choice.”
Listed companies and brokers have benefited from a marked increase in trading volumes in Small Cap securities. The first full month of SETSmm trading, September 2005, saw a 25 per cent increase in value traded against June 2005, the last full month of trading on SEAQ. Value traded in September 2005 was 77 per cent higher than September 2004.
Investors have benefited from reduced trading costs across all transaction sizes. For smaller trades, the transaction cost has been reduced by 30 per cent, and for larger trades the reduction is 10 per cent compared to trading on SEAQ in June 2005. These trading cost reductions have been driven by a compression in spreads, with headline spreads tightening by an average of 33 per cent compared to SEAQ spreads in June 2005.
Martin Graham continued:
“The market efficiencies generated by SETSmm have been particularly good news for private investors, who by our calculations have saved over £2 million in improved prices since July 2005, compared to the previous quote only system. Combined with lower private investor data charges and lower fees for brokers, we believe that these measures offer increased opportunities for our retail brokers and their clients.”
The Exchange also confirmed today that the intended migration of the AIM50 and the 100 remaining Main Market Small Caps to SETSmm will go ahead, as scheduled, on 5 December 2005.
For further information, please contact:
Richard Webster-Smith Press Office +44 (0)20 7797 1058
Notes to editors:
The full, three month Small Cap SETSmm trading review can be found at: www.londonstockexchange.com/dte
SETSmm is an order book for trading small and mid-cap securities. This extension to SETS is a hybrid market supported by continuous liquidity provision from market makers.
Since its launch on Monday 3 November 2003 for the trading of Main Market Mid Cap securities, the market has benefited from tighter spreads and greater liquidity.
In July 2005, after an extended period of market consultation the Exchange introduced SETSmm to the largest 200 Main Market Small Cap Index securities, by market capitalisation.
The remaining 100 Main Market Small Cap securities and AIM 50 securities will be transferred to SETSmm on 5 December 2005.
SETSmm securities were previously traded on SEAQ, the Exchange’s quote-driven trading system.
A full list of all market makers and the securities in which they have registered is available at: www.londonstockexchange.com/setsmm
About the London Stock Exchange:
The London Stock Exchange is one of the world’s leading equity exchanges and an international provider of services that facilitate the raising of capital and the trading of shares and debt securities.
The London Stock Exchange is the most international equities exchange by trading in the world and Europe's largest pool of liquidity. In 2004, 80% of all European IPOs floated in London. By the end of 2004, the market capitalisation of UK and international companies on the London Stock Exchange’s markets amounted to £3.5 trillion, with £4.7 trillion of equity business transacted over the year.