Competition is again heating up on the Pan European equity-trading front. Today, Nasdaq OMX Group unveiled plans to develop a new Pan-European trading and routing platform for blue-chip stocks.
The new Nasdaq OMX Pan European Market is scheduled to open in September of 2008 and will offer trading in 300 of the most actively traded European blue-chip shares at inception. It will be the first market to connect major European trading centers through a sophisticated Pan-European routing system, according to the release.
Nasdaq OMX is applying to be a multilateral trading facility (MTF) supervised by the U.K.'s Financial Services Authority. The launch of the system is subject to regulatory approval by the FSA.
As a potential differentiator, Nasdaq OMX will leverage the INET technology, which is the basis for Nasdaq's U.S. electronic stock market, and intended to deliver sub-millisecond transaction speeds to the new Pan European trading system at rates that are the fastest in the industry, contends Nasdaq OMX. INET can handle trading volumes in excess of six billion shares daily and routinely handles over 250,000 transactions per second, according to Nasdaq OMX, which claims this will set a new standard for cross border trading in Europe.
The initiative is the first since Nasdaq's combination with OMX, the Swedish operator of Nordic and Baltic exchanges, closed in late February.
The move comes in response to regulatory changes in European capital markets, which are undergoing a transformation as a result of the European Union's Markets in Financial Information Directive (MiFID) going into effect last November. "We are positioning ourselves to serve our customers in the wake of a regulatory change that will break down monopolistic barriers that have survived in Europe, but that will not hold in a post-MiFID environment," stated Bob Greifeld, CEO of Nasdaq OMX in the release.
The new entity will draw on the strengths of Nasdaq and OMX in that both are "recognized leaders in advanced trading technology and have experience in building fast, liquid, transparent and highly efficient markets," Greifeld further stated in release.
Commenting in the release, Magnus Bocker, president of Nasdaq OMX, said, "We will deliver the world-leading execution that professional traders seek such as direct access to our core matching engine, a specific product offering designed for advanced traders, market data services for co-location customers and a post-trade fee model that is geared for high-frequency trading," commented
The initiative will handle displayed and non-displayed orders in one composite order book, suggesting that it could include dark order types or a dark liquidity pool. Clearing will be handled through a pan-European clearing facility and settlement will be done locally.
Nasdaq OMX will compete against other Pan-European alternative trading systems — including Instinet Chi-X Europe, Turquoise, NYFIX Euro-Millennium and Equiduct Trading— that have cropped up in response to MiFID.
Earlier in the week, NYFIX Euro Millennium announced that trading went live on its Pan European system in March, which is open to both buy and sell-side participants. Meanwhile, yesterday, Chi-X Europe disclosed that it was successfully trading, clearing and settling the top five component stocks of the OMX Stockholm 30 index. Currently, trading Swedish stocks on the Stockholm Stock Exchange (which is part of the OMX Nordic Exchange) costs an average of 1.07 basis points, compared to Chi-X Europe's 0.05 bps cost, based on a passive/aggressive rebate ratio of 50:50, according to the Chi-X Europe release.
Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio