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Nasdaq OMX Europe Begins Operations
September 26, 2008
Nasdaq OMX Group today began a phased rollout of its pan-European market for European blue-chip stocks. The multilateral trading facility (MTF) is trading 25 securities on the FTSE 100 index; by November it will offer about 600 stocks, including Dutch, Finnish, German and Swedish equities.
First announced in March, London-based Nasdaq OMX Europe received approval from the Financial Services Authority earlier this month. Clearing and settlement for the platform will be handled by Fortis’ European Multilateral Clearing Facility subsidiary, and Citigroup is supplying order-routing services.
The Nasdaq MTF, which offers a rebate of 0.2 basis points (bps) for supplying liquidity and charges 0.3 bps for taking it, already has several major firms participating, including Credit Suisse, Deutsche Bank, JP Morgan Chase & Co. and UBS. Though Charlotte Crosswell, president of the venue since May, would not offer any volume predictions, she told Securities Industry News that “our offering is very competitive. And our growth potential is significant. We are the fastest market, executing in microseconds.”
The transatlantic exchange operator also said that it has introduced the Nasdaq OMX Europe index (NEUX), which will track companies traded on the MTF and will be disseminated every 15 seconds.
Added Crosswell, previously head of business development at London-based Pension Corp., in a statement: “We are looking forward to delivering a better trading experience to investors as securities trading moves toward higher volumes executed at faster speeds. With our unique order-routing capability, not offered by any other MTF, we have the capability to revolutionize the trading environment in Europe.”
Nasdaq OMX Europe will offer separate pricing models for routing and matching orders. The deal with Citigroup, announced Sept. 1, will allow Nasdaq to send orders that go unmatched on its order book to other venues. “Citi has taken a lead role in providing electronic execution for alternative venues in the U.S.,” said Simon Cornwell, Citigroup’s head of electronic execution services for Europe, the Middle East and Africa. “The provision of routing services to a leading player such as Nasdaq OMX in Europe was a natural step, as our products are evolved to meet the challenge of the post-MiFID landscape.”
Alternative trading platforms are proliferating in the wake of the European Union’s Markets in Financial Instruments Directive (MiFID), which became effective in November. Turquoise began operations in August and Instinet-backed Chi-X went live in April 2007. Many more are expected to open their doors in the coming months. NYSE Euronext said earlier this month that it plans to launch an MTF in November--it is also preparing to launch its Smart Pool venture with BNP Paribas and HSBC. BATS Trading is readying a European platform and the London Stock Exchange (LSE) is proceeding with plans for its Bakail dark book, slated for first-quarter 2009, despite the bankruptcy of its partner, Lehman Brothers.
“The European market is beginning to fragment and move toward an all-out price war,” said Larry Tabb, CEO of New York-based Tabb Group. “We have seen Chi-X gain about 4 percent market share. … We have seen the price of trading plummet as the LSE has just switched to a maker-taker pricing model and most exchanges are reducing their trading fees significantly.”
“The marketplace will take some time to find an equilibrium,” said Turquoise CEO Eli Lederman. “Competition will come and go, and traders will decide which venues add value and which just duplicate or fragment the market.”
