LSE moves to faster UK trading system

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The London Stock Exchange has switched its main trading platform over to a faster system, completing the largest and most high-profile part of a critical IT project.

The exchange is dumping its TradElect system, replacing it with one supplied by MillenniumIT, the Sri Lankan company it bought for $30m in 2009. The project has been broken down into stages and on Monday it undertook the switch-over for the main UK trading book, which accounts for the majority of share trading on the LSE.

The project is part of a move by the LSE to regain its position as a leading global exchange. It will adopt a faster trading system to take on rivals, expand into derivatives and streamline its clearing business.

“This migration is a crucial step forward in our drive to offer best in class trading services and marks a key milestone in the introduction of tightly integrated transaction technology across our markets,” said Antoine Shagoury, chief information officer, London Stock Exchange Group.

The migration comes days after the LSE agreed an all-share merger with TMX Group, operator of Canada’s largest bourse. In addtion to creating the world’s largest bourse by number of listings, the deal will allow both parties to pool their specialist trading platforms and cut IT development costs.

The planned upgrade to the platform in November was suspended after an outage hit the migration of the Turquoise dark pool for pan-European equities. That prompted the LSE to delay the switch of its far bigger UK equities trading platform to the Millennium system until early this year. The LSE said at the time a preliminary analysis pointed to human error, but added that this was possibly due to “suspicious circumstances” before admitting last month it was “human error”.

Xavier Rolet, chief executive, has said the system is one of the fastest in the world, capable of executing trades in 124 microseconds. Such a speed is faster than Nasdaq OMX and double the average of the fastest speeds on platforms operated by BATS Global Markets.

Faster trading systems are seen as crucial to attracting high-frequency trading firms. The LSE has lost market share for trading in UK equities to smaller rivals such as Chi-X Europe and BATS Europe, operated by US-based BATS Global Markets. The two parties, who are in takeover talks, are heavily used by proprietary traders.

The LSE will move other parts of its operations onto the Millennium platform in due course.

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