The Impact Of Multilateral Trading Facilities On European Stock Trading

Within Markets in Financial Instruments Directive (MiFID) came into implementation on November1,2007, a new type of trading venue, so called Multilateral Trading Facility (MTF), was introduced to promote competition. After four year’development, European multilateral trading facilities are changing the landscape of pan-European trading territory. Therefore the research of MTF and its influence is important in both theory and reality.The thesis systemically introduced relative theory about MTF, discussed and analyzed the comprehensive impact of MTFs from different aspects and its relationship to market quality, high-frequency trading, dark pool trading. We believe that the introduction of multilateral trading facility in European Union have improved its market quality, especially in large cap stocks such as FTSE100. But different to the former research of Storkenmaier, Riordan and Wagener (2011), compare to regulated market, we believe there is much greater difference in its liquidity improvement. To Liquidity required small cap stocks MTFs actually has little effects. At the end give advice on Chinese securities exchange reformation. Chinese securities exchanges need an overall reformation to deal with global wide competition and challenge. Introducing new trading venue and establishing a diversified competition system is also of importance to our financial industry development.There are four main parts in this thesis:In part1, the previous literatures have been reviewed, and the background as well as the belief of paper’s structure and innovation.In part2the paper principally introduced the developing situation of MTFs in European Union,its major superiority, three major MTFs, and also comparison with alternative trading systems in the US.In part3we analysis MTFs and theirs triggered market fragmentation will improve market quality, principally liquidity, as well as its limitation. The part also includes its relationship to high-frequency trading, dark pool trading and the impact of outages on MTFs.In part4combined with Chinese actual situation, discussed major problems of domestic stock exchanges, we intend to draw on the experience from the reformation of European Union for China and its countermeasure.