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Proportion of OTC trades just 16 per cent

Wednesday 20 April 2011 - by Andrew Hickley

The proportion of European share trades that take place over the counter is closer to 16 per cent, instead of the widely quoted 40 per cent figure, according to a new report.

Published by the Association for Financial Markets in Europe, the study reveals that 60 per cent of all OTC equity trades reported between 2008 and 2010 were replicate trades that had already been reported elsewhere.

It blames "confusing" Mifid reporting rules, arguing that the directive has failed to differentiate between genuine and technical trade reporting.

The actual size of OTC markets is at the heart of a review of the directive, which is aiming to impose higher transparency requirements on certain off-exchange venues.

Afme, which represents banks, brokers, and investors among others in the wholesale financial markets, argues that reporting requirements must be made more granular and standardised to address this issue and provide "much needed clarity" on the liquidity of European markets.


Commenting on the research findings, Christian Krohn, a managing director of equities at Afme, admitted his concern that policy decisions over OTC markets were being driven could be driven by "misinformation or misunderstanding".

"In light of the ongoing Mifid review and regulatory proposals around OTC trading, it is critical that policy makers have a full and accurate understanding of the nature and scale of the OTC market.

"The Afme analysis of the composition of OTC equity trading and conclusions on its true size as a proportion of the European market will help provide this much needed clarity."


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