MiFID brought market fragmentation to Europe back in 2007. In broad strokes incumbent exchanges lost market share to newcomer MTFs predominantly located in the UK. For UK stocks this meant that the fragmentation occurred within their home country, whereas EU27 stocks moved partly to London.
But how will that change with Brexit? Will markets bifurcate? Will volume return to continental Europe? Or will everything continue much as it is today? Unfortunately none of us has a reliable answer to those questions, yet.
Stocks traded in a single jurisdiction will likely continue to be traded locally, but it is anyones guess what will happen to those instruments that are traded in the UK and the EU27 in roughly equal amounts. Looking at the turnover for a large sample of EU stocks in theFidessa Fragulator(removing Swiss, British and generally illiquid stocks), roughly 230 different shares (representing about 2 trillion Euros in turnover in 2017) fall into that category. It will be interesting to track what happens to those instruments if trading across the Channel becomes more challenging post-Brexit.
