Fragmentation price formation and liquidity of Spanish equities in a European context

This paper analyses the evolution of trading fragmentation in Spanish equities between 2018 and mid-2024, continuing a previous analysis conducted a few years ago. It also explores the price formation process across different trading venues and their liquidity conditions. Most of the indicators and metrics in this study are also presented for five other European countries and the United States to facilitate meaningful comparisons. The motivation for this research stems from the need to assess changes in market structure and price formation following the implementation of MIFID (I and II) regulations and the emergence of new market participants, such as multilateral trading facilities (MTFs) and systematic intenalizers. The findings of this study indicate thar trading fragmentation in Europe has persisted throughout the analyzed period. Market shares of home trading venues exhibit significant differences depending on whether the calculation considers only on-book trading or the total market, which includes off-book transactions. Additionally, off-market (OTC) trading remains at significant levels. Regarding price formation and liquidity, the indicators show that home venues retain the most significant role in price formation and liquidity, while CBOE the leading competitor at the European level, achieves similar metrics in terms of liqueidity an of proportion of price-improvements.