The London Stock exchange plans to be the first to go head-to-head with the Spanish exchange next month as Europe's top trading venues look to pile into the last untapped market in the region. Europe's main stock markets, including the LSE, NYSE Euronext and Deutsche Boerse, have in the past three years lost big chunks of domestic share trading to faster, cheaper rivals known as multi-lateral trading facilities (MTFs).
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In Europe only the main Spanish exchange group - Bolsas y Mercados Espanoles - has kept its monopoly over domestic share trading, helped by a rule on how Spanish shares are cleared and settled that effectively prevented the entrance of rivals.
But a recent regulatory change by the Spanish authorities has now paved the way for the MTFs to compete in a market that is home to some of Europe's most actively traded stocks, with the LSE's MTF Turquoise the first to show. "We will, in partnership with our clearer EuroCCP, be the first to start trading Spanish blue chips under the improved regime in May, now the clearing and settlement issues in that market have been cleared up," Adrian Farnham, the new chief executive of Turquoise told Reuters in an interview.
Turquoise, with its MTF rivals Chi-X and Bats Europe, hope to replicate in Spain their success in other European markets, where these firms share as much as a third of all share trading. "The MTFs currently have only 1 or 2 percent of Spanish trading between them but, given a lot of Spanish trading originates out of London, I wouldn't be surprised to see that proportion closer to 20 percent in a year's time," Farnham said.
Farnham, who was Turquoise's chief operating officer until he replaced David Lester in the top job ten days ago when Lester became the new Turquoise chairman, is also bullish the merger between Deutsche Boerse and NYSE Euronext will play into the LSE's hands as it looks to push into futures trading.
"The competition authorities have plenty to think about with this merger (NYSE-Deutsche Boerse) so I think this is the perfect time to pose these questions and provide an alternative," said Farnham.
Turquoise said last Tuesday it will launch a FTSE 100 future in early June, a move that will pitch it into direct competition with NYSE's European futures exchange Liffe, the main venue for FTSE futures trading. "Turquoise derivatives will look to emulate Turquoise in the cash markets, with pan-European coverage," said Farnham.
Turquoise, which was launched by a consortium of investment banks in late 2008 before it was bought by the LSE early last year, conducts 4.2 percent of all European share trading, Thomson Reuters data shows. This makes Turquoise the third largest pan-European platform behind Chi-X Europe (17 percent) and Bats Europe (5.5 percent), two firms which are also planning to merge later this year, subject to regulatory approval.