New trading platforms challenge LSE

By Olesya Dmitracova

LONDON (Reuters) - Faster and cheaper new trading platforms are starting to erode the London Stock Exchange's (LSE.L: Quote, Profile, Research) position as the trading powerhouse of Britain, speakers at the Reuters Exchanges and Trading Summit said this week.

New European regulations and rising discontent among investors and hedge funds with traditional stock exchanges -- such as the LSE whose history goes back to the 17th century -- have led to a new generation of alternative trading platforms.

"Clearly, what we can see is the LSE monopoly crumbling before our eyes," Simon Brickles, chief executive of smaller-cap stock exchange PLUS Market Group (PMK.L: Quote, Profile, Research), told the summit.

In Britain, Chi-X Europe gained about 10 percent of the daily total volume of trading of FTSE blue chips in its first year. It hopes for a 25 percent trading share of London blue chips in a year's time.

Turquoise, a pan-European share-trading venture backed by nine investment banks and due to launch later this year, expects European exchanges to lose almost half of their market share in trading in a year's time. They currently have between 85 and 95 percent market share.

The LSE will feel the loss acutely when Turquoise goes live, as the seven major sell-side houses among its backers will take their business away from the LSE, said John Barker, managing director of electronic platform Liquidnet.

"When it comes to competition for trading, there's an inordinate amount of bluster relating to market share, which is invariably selective," the LSE said in a statement.

So far this year, the average daily number of electronic equity trades on the LSE has been over 1 million, an increase of 43 per cent on the first four months of 2007, it added.  Continued...