Turquoise, the equities trading platform, is due to announce plans for a pan-European share trading service linking “dark pools” operated by banks in the latest effort to combat the increasing fragmentation of liquidity across the region.
The move also pits Turquoise, launched three months ago, against the London Stock Exchange for a second time, because the exchange plans to launch a dark pool of its own.
The LSE is battling platforms such as Turquoise for its share of trading in blue-chip stocks. According to Fidessa, a provider of the technology that connects market participants to trading venues, the LSE’s share of FTSE 100 stocks has slipped to 78 per cent since competition for trading in European shares was unleashed by the European Commission a year ago.
Turquoise, backed by nine investment banks, has about a 6 per cent share, with Chi-X, majority owned by Nomura, on more than 13 per cent.
Dark pools are trading facilities allowing the execution of large blocks of trades anonymously. They have grown in Europe after the Markets in Financial Instruments Directive enabled the emergence of the trading venues that are now competing with the region’s established exchanges.
Investment banks operate their own dark pools, which they often use to match client orders before sending those orders out to other venues. By linking, or aggregating, those dark pools, Turquoise said it would increase the chances that trades get done.
Eli Lederman, chief executive, said: “Everyone is limited by the fact that they only have their own dark pool. Our independent, centralised infrastructure offers a meeting point for otherwise fragmented liquidity.” Its launch is set for the first quarter.
Dame Clara Furse, LSE chief executive, said recently that the exchange’s dark pool – named Baikal – would act as a “liquidity aggregator” across Europe. It is due to start in the second quarter.
Credit Suisse and Instinet Europe, a broker, were the first to move towards aggregated dark pools in July when they started carrying out trades on each others’ dark pools.
Turquoise will earn a share of the fees that the participating banks would charge a third party for accessing their dark pool. However, its plan comes as it is trying to raise fresh funds from “strategic investors”, as its shareholders suffer mounting losses and cut jobs.
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