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.”
