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Financial markets are odd things. They’re supposed to be pretty efficient, but weird stuff happens. And if you try to solve one issue, the fix almost invariably causes another one to crop up. Here’s a fun example.
Last year the London Stock Exchange’s indexing business announced that it would once again allow dollar and euro-denominated shares in its flagship benchmarks. As we wrote at the time, the hope was that this would make London listings a smidgen more attractive for international companies — both in terms of keeping some existing ones and enticing new ones.
It’s probably a forlorn hope, but the LSE could be forgiven for a kitchen sink approach to reinvigorating the exchange’s roster of public companies. A few minor but sensible tweaks to the FTSE Russell’s rule book couldn’t do any harm, right?
Well . . . InterContinental Hotels Group became the first to take advantage of the rule change, and is now a great example of just how wonderfully weird, unpredictable and dysfunctional stock markets can be.
Although IHG is a member of the FTSE 100 and headquartered in Windsor, it has a global business, has listed ADRs in New York, and has long reported results in dollars. It therefore announced last October that it would take advantage of the rule change and switch the denomination of its stock on the LSE from pounds to dollars:
IHG has reported its financial results in USD for the past 17 years. Changing its share price currency to match its reporting currency will help reduce the translational impact of exchange rate fluctuations on the share price, therefore better aligning the share price to financial performance, and simplifying the investment appraisal of IHG.
The switch finally happened at 8am GMT on January 2. The expectation was that this would be beyond a nothingburger.
After all, the company is only changing the denomination of its shares, nothing more. It was only mentioned as a dull, technical aside in its third-quarter results, and no one wrote about the shift, including Alphaville (which has an unhealthy interest in these things). Financial markets are populated by some of the smartest people in the world and they can obviously handle currency conversions.
Just look at how the liquidity of IHG has remained omg holy cow what just happened?!
The difference between what people are willing to pay for or sell IHG shares averaged just 6.33 basis points in 2025 (and only 5.99 bps in 2024), according to BMLL, a UK market data provider, which kindly pinged over the raw numbers to Alphaville.
However, on IHG’s first day of trading as a dollar share the bid-ask spread rocketed to over 26 bps, and on January 9 it peaked at an astonishing 52 bps. The highest the spread ever hit in 2023-2025 — including in the liquidity-parched days of late December or on the turbulent “Liberation Day”— was 12 bps. And this is a long-established £15.6bn FTSE 100 company, not some poxy Aim-listed shitco.
Average trade sizes and volumes have actually been pretty decent so far this year, but you can see further evidence of the impact on the market depth of IHG’s stock. The so-called L1 liquidity depth measure — the volume of publicly quoted orders to buy or sell at or near the current price — has atrophied from an average of $31.4k in 2025 to $22.1k in 2026.
Yes, there have only been two full trading weeks of 2026, and depth is only somewhat lower than it averaged in 2024. But InterContinental Hotels’ market capitalisation is a third higher today than it was at the beginning of 2024, so it still represents a solid decline in the depth of the stock.
What has driven it? It looks like the seemingly innocuous currency denomination change caught some market-makers unawares, caused some minor but awkward operational challenges, and led them to pull back from the stock. They have an obligation to provide firm two-way prices, but the instinct is often to widen them sharply when there’s anything funky going on, even if it’s your own systems causing a headache.
Does it matter? No. It’s mostly a curiosity. But for IHG investors it isn’t great. They might care more about the stock’s headline 1.9 per cent decline than dorky data about market liquidity, but wide spreads silently eat into an investor’s returns whenever they buy or sell.
Moreover, a £15.6bn FTSE 100 constituent with a bid-ask spread so wide you could drive a double-decker bus through it isn’t a good look for the London Stock Exchange either, or the firms that are supposed to support its members’ liquidity. Nor is poorer liquidity what IHG wanted to achieve with changing the denomination of its stock.
However, it’s unlikely to be a lasting phenomenon. The gap between buy and sell orders remains exceptionally wide — at 18 bps on Friday — but it has narrowed markedly since the early January spike, and it will probably continue to do so as market-makers and other traders become more comfortable with the stock’s new denomination.
Still, it’s a fun reminder of how even small tweaks can cause glitches even for large listed companies on premier equity markets — and these glitches aren’t always caused by dumb retail traders.
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