Jan 16 Pan-European trading platform Equiduct is
exploring options, including possibly closing shop, four sources
familiar with the situation said, as Citadel LLC and Knight
Capital Group, two of its top investors, back away from
efforts to build a challenger to Europe's more established
Equiduct had been looking for fresh investors for several
months but came up empty in its search, one of the sources said.
Equiduct's board, which includes representatives from
Citadel and Knight, met on Tuesday to discuss the matter, but
ended up putting off a decision, two of the sources said.
The board plans to meet again in early February, and in the
meantime will continue to look for alternatives, including
finding new investors, the people said. But another person with
direct knowledge of the talks said it was likely the platform
would be closed.
A spokesman for Equiduct declined to comment.
Chicago-based Citadel took a majority stake in Equiduct in
July 2009. Jersey City, New Jersey-based Knight took a stake in
June 2010. The electronic trading firms act as market makers on
the platform, which is run by Germany-based Börse Berlin,
matching buy and sell orders from retail brokerages.
A key challenge for new exchanges is attracting sufficient
liquidity to attract new traders. Citadel and Knight are top
liquidity providers in the U.S. market. Their relationships with
Equiduct gives them ready access to European retail investors.
Both Citadel and Knight also own stakes in Direct Edge, the
No. 4 U.S. equities exchange.
A spokesman for Citadel and a spokeswoman for Knight
declined to comment. A spokesman from Börse Berlin was not
immediately available for comment.
Knight is in the process of being taken over by automated
trading firm GETCO after a trading glitch nearly sank the firm
in August, forcing it to re-evaluate its entire operations.
Hedge fund Citadel, which also has a market-making business,
was considering pulling back from the investment as the trading
platform had not gained as much traction among retail firms as
had been expected, one of the sources said.
At the time Citadel announced its investment in London-based
Equiduct, one of the firm's executives told Reuters he expected
the trading venue to replicate the success of Citadel's
investment in Direct Edge over the following few years.
Direct Edge and BATS Global Markets expanded quickly in U.S.
equity trading in the 2000's, sparking a price war that reduced
the cost of trading U.S. stocks, and cut into the market shares
of NYSE Euronext and Nasdaq OMX Group.
The number of trades on Equiduct rose by 10 percent in 2012
over 2011, with the value of trades increasing 7 percent to 36
billion euros ($48.12 billion), the trading venue said last
That bucked the trend of a combined 21 percent decline in
trading across Europe on all exchanges, but it was still just a
sliver of the overall market. Month-to-date, Equiduct has a
pan-European market share of 0.73 percent, according to Thomson
Competition among multilateral trading facilities (MTFs) has
been fierce in recent years since pan-European regulation opened
the market to competition in 2007.
A lack of funds led to the closing of Spain's Plataforma
Alternativa de Valores Espanoles in February, while Nasdaq OMX
Group shuttered a pan-European MTF it operated, called
Neuro, in April 2010 as the business failed to gain enough