Commenting on the London Stock Exchange consultation on SETSmm, she added:
"There is a debate about what benefits SETSmm has brought to the investor. The consultation by the London Stock Exchange highlights that spreads have reduced, value traded has increased and SETSmm has significantly improved the price formation process. However, in the research document issued by ITG on 1st November, their review of SETSmm first year states that 73% of the turnover in SETSmm stock still takes place off the order book; that whilst top line spreads have narrowed, liquidity issue means that SETSmm investors may not have been able to reduce their trading costs and that once the demand for liquidity to create a typical order size has been factored in, spreads are at best the same as they were when trading in the SEAQ segment and wider when based on average pre SETSmm order sizes.
"APCIMS members report that they have concerns with SETSmm. These include increased costs because of the need to use the central counterparty; absence of "depth" in the order book resulting in them going direct to market makers instead and there are problems of connectivity.
"The introduction of MiFID (the new Investment Services Directive) will bring changes and APCIMS recognises the need for all to plan in advance. However, to extend SETSmm when not only are there user issues with it, but when the external analysis is mixed, is of serious concern. We will be proposing that a full independent review is undertaken before any further changes take place so that collectively, there is agreement on what needs to be done and what will be in the best interest of the investor".
