Mostly… fixed income and cross product eTrading

November 15, 2006

Challenges to existing landscape

Filed under: 2015 — holky @ 8:43 am

The world’s biggest investment banks are to create a new pan-European system for trading shares to rival Europe’s top stock exchanges
bbc news here, and efinancialnews here

The banks have been working on the project for at least the past several months and currently call it a Multilateral Trading Facility, the technicalities of being seen as creating an exchange.  The banks will trade stocks on it that are listed on other exchanges. Companies that list on the LSE also will be able to be traded on the bank-consortium platform under a passport-type system that will exist under MiFID. None of the participants was prepared to comment ahead of the formal launch today. But the new facility would be run as a utility and so not required to make a profit, which suggests that it would undercut fee levels on existing exchanges. Just how many shares could be traded would depend on customer demand, but those behind the scheme insist it is not the intention to limit this to solely the most liquid stocks.

Exchanges have been watching the talks between the seven with increasing nervousness over the past few months, although there were initially doubts over whether the seven companies would be able to reach agreement given the vicious competition they engage in on a day-to-day basis. The seven, along with HSBC and ABN Amro, are also collaborating in Project Boat, over data reporting, which could hit revenues the exchanges generate from this activity.

These “2015” strategic alliances are being announced more frequently now. I wonder how long it will be until we see a “joined-up” version challenging the existing landscape in more than one asset class?

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2 Comments »

  1. […] Holky’s posted recently about a couple of new ECN/exchange initiatives: Project Boat and LiquidityHub. I was quite heavily involved with FpML back in the late 90s. I was a more distant observer of SwapsWire later on. And I had some standards involvment in other sectors before I got into this game. So I’d like to offer some thoughts on the standards process… […]

    Pingback by FpML, SwapsWire and the new challenges « Coding the markets — November 16, 2006 @ 2:16 pm

  2. The regulatory and trading environment for each initiative to actually do what it says it’s for is there, so as long as some of the cost saving/revenue gain is made available on the customer side to ensure customer appetite to use it, then surely the only remaining hurdle of building the tech platform sufficiently “right” is not an insurmountable prospect? This is after all generally about replacing existing functionality.

    But worst case what if there are problems in getting so many dealers around a table to agree? It’s not a bad bet that personal/firm agendas will arise when something needs to be signed, but maybe that leads the initiative on to a more simple overall (hidden?) agenda – “just” to effect a power-shift re costs and charges; from now where the exchanges/platforms set the levels, to something giving those dealers providing liquidity more of a say in who pays for what, when, where, how? With that goal any technology/platform that is actually spec’d/built by the consortium would only be built in order to be thrown away once the threat of taking it to market had worked, so even if the “cabinet” members were a bit suspect, you’d just need to ensure everyone in the tent knows they are actually IN the tent and which direction is OUT.

    Overall then, even if one doesnt believe that these and other similar initiatives will succeed in their currently stated aims, I can’t help thinking they really do have an achievable goal and part to play in changing the etrading landscape – even if they dont acknowledge their specific role or goal just yet.

    Comment by holky — November 16, 2006 @ 4:13 pm


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