I was surprised to read this morning that the former leaders
of Barclays (Capital) Bank are launching a new European stock exchange.
Apparently Rich Ricci and Bob Diamond – the former
CEO of Barclays investment bank and Barclays Bank respectively – are the backers
of Aquis, an exchange run by former Chi-X CEO Alasdair Haynes. The other major backer is the Warsaw Stock Exchange,
who own a 30 percent stake.
I’m sure they know what they’re doing, but does Europe need
We have LSE, Deutsche, Euronext as the three large traditional
heavyweights, and Chi-X has beaten most contenders to become the de facto
algorithmic heavyweight, so why another one?
According to their website,
another one is needed because there are only two exchanges in each country across
Europe to trade upon today: the traditional one and the BATS Chi-X platform
(BATS and Chi-X, the two largest multilateral trading facilities merged at the
end of November 2011).
Bearing in mind that Alasdair is the guy who led Chi-X to
this merger and, before that, was in line to be Dame Clara Furse’s successor as
CEO of the London Stock Exchange (LSE), he’s an interesting choice to be the
CEO of Aquis as is Niki Beattie as non-executive e Chairman. Niki was heavily involved in building BOAT,
the trade reporting system, and Turquoise, a competitor to Chi-X that was acquired
by the LSE.
Aquis is scheduled for launch in October, subject to approval from the Financial Conduct Authority (FCA), and is already testing connectivity
using FIX Protocol. Again, according to their website,
their success will be based upon:
- a new
pricing methodology based upon subscription pricing;
order types; and
technology with a new design and architecture with added functionality.
Personally, I think they’re going to be entering the fray
with a new order type that wraps the trade with the reporting and settlement options.
That is the only deal breaker I can think of out there right now – remembering our
CAS-WG discussions about EMIR, LEIs, etc – but it’s going to be a challenge.
Nevertheless, sounds like a challenge that they’re stepping up
to the mark for and with seriously credible backers, there’s definitely something
in this offer.
Meantime, for a more detailed review, here’s what they say
Following the introduction of new regulation (MiFiD) in 2007
the European cash equity stock exchange business changed considerably. From
2008 to 2011 new competitors in the form of Multilateral Trading Facilities
(MTFs) took significant market share from the incumbent national exchanges.
Across all European markets, MTFs gained market share of approximately 25-30%
establishing themselves as viable competitors to the national exchanges.
Growth of UK Based MTFs
Between 2007 and 2011 MTFs have gained significant market share at the expense
of the incumbent exchanges, demonstrated by the FTSE market share chart below.
In 2012, this trend started to reverse, following the merger
of the two largest MTFs in Europe. This is particularly evident in the London
market where since December 2011 the LSE has increased market share in FTSE100
trading from 54% to 62% whilst the MTFs market share has fallen from 38% to
32%; however the two companies now account for over 94% of trades in the
This is reflective of the lack of real competition in the
European market – in fact equity markets have effectively become a duopoly. The
national exchange and BATS Chi-X Europe account for a market share in excess of
90% for every equity market in Europe.
Source: Thomson Reuters, January 2013. Data for lit order
The creation of Aquis Exchange will reverse this trend,
introducing lower costs whilst stimulating innovation and re-introducing
competition to the market.