I-banks take on Euro SEs in data war
A group of nine firms led by Citi, Goldman Sachs and Merrill Lynch plans to develop a common platform to publish European trade and market data and yield significant cost benefits.
By Agencies |
LONDON: Citigroup, Goldman Sachs Group, Merrill Lynch & Co and other securities firms will start a network to report their trades, challenging European stock exchanges that now make money by offering the service.
A group of nine firms will cooperate on a platform to publish European trade and market data and “yield significant cost benefits,” they said in a Business Wire statement on Tuesday.
Participants include Deutsche Bank AG, Credit Suisse Group, ABN Amro Holding NV, UBS AG, HSBC Holdings and Morgan Stanley. The network is expected to start by August ’07, they said.
The European Union is introducing a new law on disclosure, letting banks and brokers choose where they publish market trades. The EU’s Markets in Financial Instruments Directive, known as Mifid, becomes law in ’07.
In several markets, including Britain, brokers are now required to report trades in the over-the-counter market to exchanges.
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“The consortium has taken the initiative to create a single pre- and post-trade reporting and market-data platform on a pan-European basis,” the banks’ statement said. “This platform is therefore expected to improve transparency and yield significant cost benefits as a result of the economies of scale.”London Stock Exchange, Europe’s third-largest by market value, and other markets now charge banks and brokers a fee to receive the information. Exchanges then sell market data to banks and other vendors. New rules from Mifid mean companies or agencies that aren’t exchanges can perform the same function.
Some markets, including Germany, don’t have rules saying trades conducted off exchange must be disclosed. In the UK, banks and brokerages could report their trades only to LSE or the Swiss exchange’s Virt-x unit, which has a UK licence. Future trades will only be reported on the network.
Speaking on a conference call on Tuesday, a spokesman for the banks said they had not approached any of the incumbent service providers because they did not want any of them to be unfairly advantaged.
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LSE said it will continue to compete. “We welcome the opportunity offered by Mifid to compete for equities business across Europe,” LSE spokeswoman Anya Velzeboer said on Tuesday. The project “expresses the market’s desire for more cost-efficient pan-European solutions, and we look forward to working with the market to deliver them.”However, she declined to comment on whether the banks move will increase pressure on LSE to cut the prices it charges the brokers to report trades, and also declined to comment on the revenue the exchange made from the trade-reporting business.
Britain’s financial regulator has told UK companies that the Mifid directive will “significantly” change how they operate. The group of nine expects to announce next month the company that will build the platform.
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