Press releases 2005
2 November 2005
SETSmm – SUCCESSFULLY REDUCING THE COST OF MID AND SMALL CAP TRADING OVER TWO YEARS
The London Stock Exchange today marked the second anniversary of the introduction of SETSmm, its hybrid electronic trading system, which gives investors the option of trading through Market Makers or directly on the order book, by issuing research on the performance of the market over the past two years.
Since its introduction, SETSmm has revolutionised the trading of FTSE Mid and Small Cap Index securities. Since its launch on Monday 3 November 2003 for the trading of Main Market Mid Cap securities, market participants have benefited from tighter spreads, greater liquidity and a growth in the overall size of the market.
Over the last two years of Mid Cap trading on SETSmm, the average value traded per Mid Cap security per day has increased by 77 per cent, and average spreads have improved by 65 per cent.
In July 2005, after an extended period of market consultation, the Exchange introduced SETSmm to the largest 200 FTSE Small Cap Index securities. In the subsequent three and a half months of trading, spreads have consistently tightened by over 25 per cent; value traded has correspondingly increased by almost 25 per cent.
The greater market efficiencies created by SETSmm have led to a direct reduction in trading costs paid by investors. Analysis of all trades from August to October 2003, compared with the corresponding months in 2005, have confirmed that the real cost of trading in the securities that have moved to SETSmm have fallen by almost 50 per cent over the last two years. This corresponds to average saving to investors of £28 million per month – equivalent to a total of over £330 million on an annual basis.
Commenting on the second anniversary of SETSmm, Martin Graham, the Exchange’s Director of Market Services and Head of AIM, said:
“SETSmm has been a huge success since its launch two years ago. It has combined the benefits of an electronic order book with the valuable support of committed market makers, brought about a reduction in spreads which in turn has stimulated increased trading. It has also encouraged the entrance to the market of new participants who prefer order-book trading. As a result, the increased size and efficiency of the market has delivered benefits to all participants, with end investors benefiting from a reduction in trading costs of over £330 million a year.”
For further information, please contact:
Richard Webster-Smith Press Office +44 (0)20 7797 1058
Notes to editors:
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 FTSE Small Cap Index securities, by market capitalisation.
The remaining 100 Main Market Small Cap securities and FTSE AIM UK 50 Index 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.