FTSE100 constituent The London Stock Exchange Group PLC (LSE: LSE) has agreed to acquire Turquoise Trading Ltd to create a new pan-European trading venue. The integration of the LSE Group’s Baikal platform and the Turquoise platform will provide a neutral European equity trading platform, which will be a FSA regulated Multilateral Trading Facility (MTF).
The newly combined neutral venue will be open to all market participants active in Europe and will build on Turquoise's existing pan-European lit order book and anonymous ‘dark pool’ trading platform. According the LSE the new MTF will be designed to inspire the confidence of the region's regulators.
LSE will fully fund the cash needs of the new venture within an agreed framework. For the year ended 31 December 2008, Turquoise's lost £15.7 million before tax. Following the merger the LSE intends to bring the MTF into sustainable profitability. It expects to incur exceptional costs of up to £20 million in the current financial year as a result of legacy technology costs, contract exit costs and the restructuring and integrating of the two businesses.
"The European marketplace for trading securities has scope to become more efficient and to grow significantly in the coming year,” LSE CEO Xavier Rolet said, "We are very pleased to be joining forces with a number of our major clients in a partnership which we believe will offer an attractive range of innovative and competitively priced products and services across Europe.
The LSE will own 60% of the new company which will retain the Turquoise brand. The remaining 40% of the company will split among the consortium of financial institutions who are the current partners of the Turquoise venture.
The pan-European trading platform was founded by 9 major financial institutions following changes in the post-MIFID European regulatory environment. The consortium comprises Citigroup (NYSE: C), Credit Suisse (NYSE: CS), Deutsche Bank (NYSE: DB), Goldman Sachs (NYSE: GS), BofA Merrill Lynch (NYSE: BAC), Morgan Stanley (NYSE: MS), UBS (NYSE: UBS), BNP Paribas (EURONEXT: BNP) and Société Générale (EURONEXT: GLE). The Turquoise MTF currently operates across 15 European markets.