Nasdaq OMX Group Inc is to offer a 90 percent discount on equities trading fees when it launches a pan-European market in September, its first move to rival European peers after a $4.5 billion merger last month.
The Nasdaq Stock Market acquired Nordic and Baltic stock exchange OMX through a three way tie-up with Borse Dubai on February 27, the second transatlantic exchange tie-up after the New York Stock Exchange's deal with France's Euronext.
"The pricing we're seeing in Europe is on average about 5 to 10 times what we charge in the US We expect fee compression to be as high as 90 percent," Chief Executive Officer Bob Greifeld told Reuters in a phone interview on Wednesday.
Analysts expect Nasdaq to price aggressively and incur losses during the start-up phase as it routes trades to other liquidity pools at a discount, and rewards liquidity providers.
"We will be paying for liquidity in the market place," said Greifeld, who has been a strong advocate of modernising stock markets and has 20 years experience in technology. While Nasdaq OMX's expansion in Europe could be costly, Lehman Brother analysts expect Nasdaq's low-cost platform will only need a small market share to become profitable.
Nasdaq had grown its market share in NYSE-listed matched trades from zero to more than 20 percent in less than three years as it translated trades initially routed to other bourses into matched volume. The transatlantic exchange group aims to break down monopolistic barriers in the pan-European market following the introduction of MidFID - the new European Union financial regulations, Markets in Financial Instruments Directive, in November 2007. "The pricing established in Europe is indicative of monopoly structures. We certainly see that competition is introduced as a result of MiFID," he said.
The new Nasdaq OMX market, set to open in September, will trade about 300 of the region's most actively traded stocks, challenging NYSE Euronext, Deutsche Borese and the London Stock Exchange, the top three European boures.
The new trading platform, which will handle displayed and non-displayed orders in one order book, will deliver sub-millisecond transaction speeds, with a capacity of over 250,000 transactions per second and over six billion shares daily. Analysts forecast European exchanges to lose 10 percent of their market share in the next three years with the rise of new trading vendors.
Chi-X, which is owned by Nomura Holdings' broker agency Instinet, already claimed a 10 percent market share of stocks listed in London last month. Turquoise, a European cash equities venture backed by nine of the world's biggest investment banks, also aims to go live in September.