Chi-X Europe CEO plans to keep low-fee strategy

Sun Feb 14, 2010 7:01pm EST

* To keep providing basic price data free of charge

* Looks to build or buy firms in data, indexes, derivatives

* Plan does not include competing for share listings

* No interest in buying rival venues for market share

By Jane Baird

LONDON, Feb 15 (Reuters) - Pan-European trading platform Chi-X Europe, Europe's third-biggest trading platform after just three years in business, said it was sticking to its strategy of low fees for at least another three years.

The upstart challenger to Europe's stock exchanges has grown to rank third in trading volume after NYSE Euronext NYX.N and the London Stock Exchange (LSE.L), and its increased clout has led consultants and others to speculate it could boost fees. --------------------------------------------------------------

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"We are a low-cost provider," said Chi-X Europe's new CEO Alasdair Haynes, in an embargoed interview.

Chi-X this year has become profitable on a daily basis, he said, making it the first European multilateral trading facility (MTF) to do so.

"This business model is sustainable," he said. "We are not going to raise prices, though most people expect we have to," said Haynes.

He also plans to continue providing clients with basic data on share price formation at no charge.

Haynes, who took over in January, is now in the process of drafting a plan for the next three years.

"My ambition is to cement where we are today with our liquidity and then continue to build that market share. I see absolutely no reason why we cannot continue that growth and become the No. 1 European exchange," he said.

Haynes said the plan calls for moves to add data services, to instigate changes in stock indexes and then add derivatives on those indexes. This plan may entail building or buying companies in those areas for their knowledge and expertise.

"You end up with a single platform across Europe that can provide you services for cross-margining of its stocks, its index products and that becomes multi-asset class," he said.

"I am not saying we are going to achieve this in three years, but that is the direction we are going to move."

CREATING INDEXES

Haynes said basic price data should be free of charge from every venue, but Chi-X could provide historical or other value-added data that people will be prepared to pay for.

He also plans to take aim at the current benchmark stock indexes, such as Deutsche Boerse's (DB1Gn.DE) DJ Stoxx, which are based on prices from national exchanges.

"Today I can see no reason why we should not be included, when we have a 20 percent market share in major indices across Europe," he said. "A marketplace that has the same standards as the exchanges should be included in the indices."

Chi-X Europe launched on March 30, 2007 to be the first in a string of new MTFs to take advantage of the opening of competition by the European Commission's markets in financial instruments directive (MiFID).

MTFs have won market share from London Stock Exchange, Deutsche Boerse and others by undercutting them on price.

Chi-X, with 117 clients, is already connected to most of the major players in Europe, Haynes said. "I am not looking so much for client growth as better client penetration."

It has no intention to move into competing for share listings as part of its plan, however, Haynes said.

"Listings is not a technology business. Our strength is using technology, so why would we want to go into the listing space, which requires a lot more people. We don't see that as our core business."

Haynes said Chi-X Europe is a "truly mutual organisation" with ownership divided between 19 major dealer clients and Nomura's Instinet, which owns 34 percent and holds two of the nine board seats. Looking ahead he sees a consolidation phase among Europe's many trading venues as money-losing operations withdraw or merge with each other.

Chi-X is not interested in buying struggling rivals for incremental market share, which can move easily anyway, Haynes said. (Editing by Mike Nesbit)

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